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Free Minds and Free MarketsMon, 19 Nov 2018 21:47:55 +0000en-UShourly1https://reason.org/wp-content/uploads/2017/11/cropped-favicon-32x32.pngAirport Security – Reason Foundationhttps://reason.org
32329/11, the Culture of Fear, and the Security Theater at U.S. Airportshttps://reason.org/commentary/9-11-the-culture-of-fear-and-the-security-theater-at-u-s-airports/
Tue, 11 Sep 2018 23:20:30 +0000https://reason.org/?post_type=commentary&p=24493Once upon a time, air travel was a nearly stress-free experience. Venturing to the skies was as simple as a few moments at a ticket counter and a metal detector. And, if you weren’t flying, you could even accompany your friends and family to their gates or meet them there upon arrival. Now you need to show up to the airport hours before your flight, deconstruct your luggage, expose electronics, dispose of liquids, take off your shoes and jacket, and put your hands to the sky for the jumbo millimeter wave body scanners.

The tragedy of America’s post 9/11 security theater is that it models what the terrorists would’ve wanted. Terrorists successfully used the events of 9/11 as a single, rare event to sow a culture of fear that we have continued to reap 17 years later.

After trillions of dollars of spending on homeland security and military actions since 9/11 and billions of inconvenient hours wasted in TSA lines, we’re still not any safer. The lack of recent terrorist attacks utilizing aircraft has little or nothing to do with the effectiveness of the TSA, which consistently fails to find 90 percent of the fake weapons sent through to test them. The security provided by TSA is far more symbolic than it is functional.

Often, even the casual traveler finds that they accidentally boarded a plane with “weapons” the TSA prohibits. How often do we open our toiletry kits to realize that we’ve flown with a safety razor, a small pocket knife or one of several hundred other innocuous items that TSA supposedly prevents us from flying with?

From trains in Madrid to cars in Paris, terrorists have proven over and over again that they will find new ways to wreak havoc. But the numbers will never be on their side. The yearly chance of dying from a foreign-born terrorist attack is 1 in 3.8 million.

Any act of terrorism is devastating. But terrorists should not be allowed to dictate national security policies and there’s no reason to continue to allow the terrorists to hold sway. Our endless wars on the front lines in Iraq and Afghanistan belie a deeper commitment to the false promises of a security state.

The ridiculous airport hokey-pokey has made many of us miss a flight, and made none of us safer. Now, 17 years after the tragedy of 9/11, would be a good time to re-examine the expensive, ineffective security bureaucracy we created in response to the terrorist attacks.

For the past year and a half, the trade association Airlines for Europe (A4E) has been waging a campaign to demonize European airports as monopolies that need stringent new price regulation to protect airline passengers. This campaign took an uglier turn in February, when the International Air Transport Association’s CEO launched an all-out attack on airport privatization.

In speeches at several aviation conferences, IATA CEO Alexandre de Juniac said, “We have yet to see an airport privatization that has, in the long term, delivered on the promised benefits of greater efficiency for airlines and a better experience for our customers.” He went on to say that “our members are very frustrated with the state of privatized airports. By all means invite private sector expertise to bring commercial discipline and a customer service focus to airport management. But our view is that the ownership is best left in public hands.” In March, Lufthansa CEO Carsten Spohr said that the privatization of major airports in Europe was “a big mistake.” In other parts of the world, he said, investors may have a role in the infrastructure, but “they are not trying to optimize returns for pension funds.”

So we have two serious charges: first, that many airports are monopolies that need price regulation; second, that airport privatization has not improved airports. Let’s start with the second of these claims

In a just-published report, I compare a list (from Flight Airline Business) of the world’s 100 largest airport providers with the 2017 Skytrax survey of the world’s best 100 airports, as identified by passengers. Of the 100 largest airport groups, 40 are either fully or partially privatized. Some 25 of the 40 privatized airports (62%) were included in the world’s hundred best airports as judged by passengers. Among the top 100 airports as ranked by passengers were privatized Zürich (#7), London Heathrow (#8), and New Kansai (#9)—all three of which are fully private (i.e., no partial state ownership). Incidentally, only five of the Skytrax top 50 were in the United States. [My report is Annual Privatization Report: Air Transportation, available at https://reason.org/privatization-report/annual-privatization-report-2018-air-transportation/].

Before de Juniac criticizes airport privatization, he would do well to consult with U.S. airlines, who are the newest to experience this change. Carriers serving privatized San Juan International are very pleased with the make-over of its decrepit 1960s-era terminals, as well as the refurbishment of its previously inoperative instrument landing system (ILS). And the major carriers serving both Midway and White Plains/Westchester airports signed off on privatization plans that they judged to be in their best interest.

The idea that privatized airports are not investing seriously in expanding terminal and runway capacity is simply false. Partially privatized Aeroports de Paris is under way on its Connect 2020 plan, investing $5.4 billion in increased terminal capacity to better serve its expanding passenger volume. Partially privatized Frankfurt has added a fourth runway and is under way on two additional passenger terminals, one exclusively for low-cost carriers. Heathrow has finally obtained government permission to add an additional runway, and Gatwick would love to do the same, if only the government would agree. And capacity expansion is going on at privatized airports in Brazil, Chile, Colombia, Peru, and many other countries.

What about the monopoly claims from A4E? They are mostly smoke and mirrors, too. Consulting firm Oxera studied the nature and extent of airport competition, on behalf of Airports Council International-Europe. For smaller airports served primarily by low-cost carriers, those airlines can move their small hubs relatively easily among other airports in a region, which puts competitive pressure on those airports. Oxera also pointed out that Europe’s three largest legacy carriers these days use a multi-hub strategy, which allows them to shift aircraft from one hub to another, which means those large airports must compete. (Ironically, Lufthansa has just announced that it will cease expanding at it largest hub, Frankfurt, in favor of Munich, Vienna, and Zürich—thereby illustrating this very point.)

To bolster its monopoly claims, A4E has put forward three claims that ACI-Europe refuted in March. They are as follows:

Claim: Airline charges at the largest EU airports have doubled over the past decade, while average air fares have decreased by half. ACI replies that charges at those airports increased only 25.4% over this period, and the increase was driven by capacity increases and regulatory requirements (e.g., airport security). And according to Eurostat, airline ticket prices increased by 29% over the same 10 years.

Claim: Lower airport charges would be passed on to consumers by airlines. ACI replies that air fares are driven by airline competition, not airport charges. And it gives an example of a €929 round-trip fare on a monopoly route between Brussels and Strasbourg.

Claim: The regulatory system incentivizes airports to spend exorbitant amounts of money on facilities. ACI replies that the top 21 European airports invested €53 billion over 10 years to achieve a capacity increase of 177 million annual passengers. Actual growth in their passengers was 168 million, pretty much on the mark.

This battle is ongoing in Europe, with A4E continuing to argue for the imposition of new regulations on airport charges. The case for such regulation looks very shaky to me.

Congress Favors Small Airports with Windfall; Short-Changes Large Airports

The FY 2018 Omnibus increased FAA’s budget for the current fiscal year (already more than half over) by $1.593 billion, with nearly all of that increase coming from the mythical “general fund.” The largest increase—$1 billion—was added to the Airport Improvement Program but restricted to small airports. And the just-passed House FAA reauthorization bill would continue that program for five years, at a cost of $5.3 billion.

Since the federal government is running at more than a half-trillion-dollar deficit this year, that 2018 increase must all be obtained by further federal borrowing. Historically, since the Airport Improvement Program (AIP) is for airport capital investment, it has been funded out of the Airport & Airways Trust Fund, whose money comes from aviation user taxes. In recent years, nearly all of air traffic control and airport grants were being funded by those user-tax revenues. The general fund portion of FAA’s budget had been trending downward to an expected 7-8% of the total in draft House and Senate FAA reauthorization bills. But with the Omnibus’s irresponsible increases, the FY 2018 general fund contribution has nearly doubled to 13.1%.

This is a very shaky future for airport funding. The Congressional Budget Office’s latest projections show that—unless there is major budget reform that no one is proposing—the annual federal budget deficit will soon be exceeding $1 trillion per year. Eventually that must lead to cuts in what is termed “discretionary” spending. And we can be sure that money that comes from the general fund will be the most obvious candidate for such spending cuts. The only way to safeguard needed aviation investments is to make sure they are funded either by user taxes or user fees—not general government revenues.

That’s why the airport community is right in its April 27th call for Congress to reconsider increasing the federal ceiling on airport passenger facility charges (PFCs). The most critical airport investment needs are in large hub airports that handle a huge fraction of all passengers—and of projected passenger growth. Since PFCs are local charges, the proceeds of which are used solely to improve the facilities of the airport that levies them, these funds are insulated from whatever budgetary travails will afflict the federal government in coming years.

PFCs are not “federal taxes,” as airline propaganda has long pretended. Fiscal conservatives should be solidly in favor of PFCs, especially if they are offered to large and medium hubs as an alternative to AIP grants. This would decentralize a large fraction of airport funding, promoting local control that directs airport investment to where it is most needed, while reducing what is now an expanding federal spending program. What’s not to like for fiscal conservatives?

On April 18th, the board of the Greater Orlando Aviation Authority voted against applying to join TSA’s Screening Partnership Program, under which it would have been allowed to replace TSA screening with a TSA-selected screening company. Had the change gone forward, Orlando would have been the largest airport by far to join SPP, replacing TSA with private screeners.

The change in plans came about for two reasons. First, powerful members of Congress—Sen. Bill Nelson (D, FL) and Democratic House members Val Demings and Darren Soto—joined with the screeners’ union in lobbying the airport board to change course. Second, TSA implemented a crash program to address the chronic long lines and delays that had led to GOAA’s board seriously considering SPP. Those changes include adding 75 more TSA screeners, delivering some new checkpoint equipment, and authorizing more checkpoint dogs. Combined, these factors led to the board’s April 18th vote.

While these changes may address Orlando’s short-term screening problems, they do not solve two underlying problems. First, under current federal budget constraints, this is a zero-sum game. The resources TSA is adding to Orlando don’t come from the Tooth Fairy; they come from other airports. This is a problem that other airport directors have expressed concerns about. Last fall Charlotte Douglas director Brent Cagle complained about TSA’s practice of reassigning screeners away from high-performing airports to address problems at other airports.

Part of this problem is budgetary. Airports Council International-North America has complained about TSA “robbing Peter to pay Paul” by shuffling screeners around airports. The organization reminds us that Congress has routinely diverted revenues from the screening tax on airline tickets to the government’s general fund—about $1.28 billion was siphoned off last year in that manner. Security tax revenues should be spent on security, period.

But another problem is TSA’s staffing model. The airline business is dynamic, with individual routes added, dropped, or changed in frequency from month to month, all year long. Yet TSA’s staffing model still reallocates screeners only once a year. That just about guarantees that at any given time, some airports will have too many screeners and others will have too few, in comparison with passenger numbers.

Many private pilots were dismayed several years ago when the U.S. Supreme Court declined to hear an appeal from start-up company FlyteNow. The company’s business model was to offer an online version of the airport bulletin boards by which private pilots offered to share planned flights with passengers willing to split the operating costs of the trip. But despite FAA having accepted this practice for decades, when FlyteNow asked FAA’s blessing, the agency decided that flight-sharing apps like that offered by the company (and several other start-ups) made them “common carriers.” That meant that any pilot using the app would have to undergo expensive and time-consuming training to obtain a commercial pilot’s license. FlyteNow took the FAA to court and lost—and the Supreme Court declined to take the case.

But last month Sen. Mike Lee (R, UT) introduced the Aviation Empowerment Act, which would over-rule the FAA and allow the creation and use of digital bulletin boards to connect private pilots with would-be cost-sharing passengers. Lee told Reason reporter Eric Boehm that “Innovation is key to competition and accessibility. Studies and experience [show that] cost-sharing services have proven to be safe and effective in other countries, and it is past time we enact them in our country, as well.”

One of those studies was released last year by Christopher Koopma of the Mercatus Center at George Mason University. He argued that Congress had never clearly defined the term “common carrier,” which left the FAA free to concoct its own definition, which it applied to Flytenow and its competitors. Policy analyst Marc Scribner of the Competitive Enterprise Institute says that Lee’s bill is a good example of what Congress should be doing more of: clarifying in statute how regulatory agencies should approach innovations, rather than leaving it to them to make things up.

The status quo puts the United States far behind Europe in this area. An article from The Daily Mail in London last summer profiled the largest such service in Europe—Wingly. It’s an expansive flight-sharing app that does on a large scale what Flytenow and Airpooler attempted to do in this country. The article listed specific flights available at that time on Wingly, and the cost-sharing charge asked by private pilots:

London to Jersey

$51

London to Newcastle

$58

Munich to Salzburg

$57

London to Le Touquet (northern France)

$82

Prague to Venice

$111

London to Belgium

$144

Cannes to Majorca

$177

Wingly has expanded its offerings to the Caribbean, offering flights such as Anguilla to Guadeloupe ($154) and Guadeloupe to Martinique ($89). Like Uber, the business models of both Flytenow and Wingly offer profiles of pilots and passengers, as well as ratings provided after each trip.

I think it’s outrageous that FAA takes such a narrow-minded view of a beneficial improvement over physical bulletin boards at general aviation airports. I hope both AOPA and AAAE put some serious effort into supporting Lee’s Aviation Empowerment Act. It could be included as an amendment to the pending Senate FAA reauthorization bill, and ought to attract significant bipartisan support.

There seems to be an emerging consensus that the Federal Air Marshals (FAM) program is too large and should be downsized. DHS Acting Inspector General told a Senate roundtable in February that the program’s $803 million budget is disproportionate to the role it plays in aviation security. He based this assessment on a classified study. Politico last month quoted a Republican staffer of the House Homeland Security Committee saying that it’s clear the program has grown bigger than it needs to be. The chairman of that committee, Rep Michael McCaul (R, TX) would like to see more of TSA’s resources applied to placing 3-D scanners at airport screening checkpoints, a sensible reallocation of limited TSA funds.

Adding to the momentum for reform is a recent New York Times investigation that judged the FAM program to be in disarray. According to that story, there are significant alcohol and drug-abuse problems among the FAM workforce, and TSA allegedly now checks that air marshals arriving for flight duty are sober. The story also reported claims of sexual and racial discrimination in the program, which the Government Accountability Office plans to investigate.

That’s all well and good, but probably does not go far enough. Back in 2013 I reported in this newsletter on careful cost-effectiveness analysis of the FAM program by researchers Mark Stewart and John Mueller, co-authors of the 2017 book on aviation security, Are We Safe Enough? In their paper in the journal Risk Analysis they compared FAMs, armed pilots (Federal Flight Deck Officers) and installed secondary barriers to prevent access to the cockpit when pilots take needed restroom breaks. Their analysis assessed how large a threat would be needed to justify the cost of each measure. The results were as follows:

Measure

Cost-Effective if Terror Attack Occurs

FAMs

More than two per year

FFDOs

One every 50 years

Barriers

One every 200 years

As I wrote then, secondary barriers are the low-hanging fruit, but FFDOs are a low-cost alternative or supplement. Together, they make FAMs superfluous. The simplest improvement would be to expand the very low-cost FFDO program and scrap FAMs altogether. If that’s too much for Congress to contemplate, scaling FAMs back to a much smaller program that is focused entirely on what TSA/DHS intelligence considers very high-risk flights would be a sensible compromise.

The counterpart of TSA in Canada—the Canadian Air Transport Security Authority—might be converted to a self-supporting nonprofit corporation, similar to the successful and popular air traffic control corporation, Nav Canada.

As in the United States, long lines and wait times at airport screening checkpoints are a growing problem as Canadian air travel has increased by 35% over the last five years. According to a Toronto Star article in March, Transport Canada has been consulting with aviation groups about funding and governance reforms of CATSA, and “the Nav Canada model emerged as a favored choice.” It would be overseen by a board of aviation stakeholders and would be financially self-sufficient from service fees.

CATSA was created following the 9/11 terrorist attacks, and it is currently supported in part by a passenger security tax of C$7 for a domestic flight and nearly C$25 for an international flight. All the proceeds of these taxes flow into the federal government’s coffers, but only a portion of the revenue is allocated to CATSA (similar to one of TSA’s problems). If CATSA were converted to the nonprofit, self-supporting Nav Canada model, it is unclear if the current security tax levels would be sufficient to cover its full cost, which is causing some concerns among air travelers and elected officials. But even if the fees would have to be increased somewhat, the revenue would continue growing in pace with the growth of air travel, so passengers and airports would benefit from shorter lines and better service.

Needless to say, the day after the Star article appeared, the largest union representing screeners—IAM Canadian—issued a news release headlined, “Privatizing CATSA Not the Answer!” But union clout on airport security is far less in Canada than in the United States. That’s because CATSA does not itself employ screeners. Instead, like most European airports, it contracts with vetted screening companies to carry out those functions. IAM Canadian represents only the 3,600 screeners who work for the contractors serving the Toronto and Vancouver airports.

Vinci Airports Enters U.S. Market. France’s Vinci Airports has purchased, from Canadian pension fund OMERS, 100% of the Airports Worldwide group of 12 airport concessions and operating contracts. In the United States, this includes the concession for the terminals at Orlando Sanford Airport and management contracts for Hollywood Burbank and Ontario International. Non-US acquisitions include 100% of Belfast international, 91% of Skvasta Airport in Sweden and nearly 50% stakes in concessions for the two largest airports in Costa Rica. Vinci Airports is now responsible for 45 airports in 11 countries, handling 182 million annual passengers.

Amazon Developing Major Hub at CVG. Prime Air Cargo, Amazon’s new transportation venture, is leasing 930 acres at Cincinnati/Northern Kentucky International Airport. It will construct a 3 million sq. ft. sorting center there, for 24/7 operations. The facility will serve 75 to 100 daily aircraft and 200 to 300 trucks when fully operational. Amazon expects to spend $1.49 billion and add 3,000 jobs at the facility. Prime Air will add much-needed business to the former Delta hub at CVG, downsized from 85% of all flights in 2010 to 43% today.

Possible Third U.S. Remote Tower at Hailey, Idaho. In the recent Omnibus spending bill, Congress authorized FAA to develop two additional remote towers (besides those under development without FAA funding at Leesburg, VA and Loveland, CO). Friedman Memorial Airport in Hailey, ID hopes to land one of them. Its current contract tower is too close to its runway, and FAA insists it be replaced by 2023. After a presentation on remote towers on May 2nd, the airport board approved applying to the FAA to be the first airport to replace a conventional tower with a remote tower.

Legislation Would Prevent Misuse of PreCheck Lanes. Rep. John Katko (R, NY) announced in late April that he will submit legislation to mandate that TSA no longer allow non-PreCheck members to use PreCheck lanes at airports. TSA Administrator David Pekoske has told lawmakers that the agency has plans to do this, but Katko said “I’m not going to give any option to do it. . . . It’s going to be a very bright line.” DHS Secretary Kirstjen Nielsen told the Homeland Security Committee that she will work with TSA to implement the change.

DFS Group Begins Operating Edinburgh Tower. A subsidiary of German air traffic control company DFS has taken over operation of the control tower at Edinburgh, Scotland as of April 1st. It won the contract that was formerly held by British ATC company NATS, via a competitive tender in 2016. Control towers in the U.K. are owned by individual airports, and may be operated either by the airport itself or by a qualified control tower operator.

Will France Fully Privatize Aeroports de Paris? Aeroports de Paris (ADP) is the world’s third-largest airport company by revenue. It owns and operates the three Paris airports and operates a total of 34 international airports. The French government owns 50.6% of ADP, with 20% owned by other airport companies and the balance by individual and institutional investors. ADP shares have increased in value this spring, based on expectations that the Macron government will sell most or all of the government’s stake, estimated to be worth €8 billion.

Japan to Offer a Bundle of Airports. In the latest step in the country’s ongoing airport privatization program, Japan’s Ministry of Infrastructure announced on May 4th that it will offer a 30 to 35-year concession for a group of seven smaller airports on the Island of Hokkaido. The process is expected to conclude with award of the concession in July 2019, with operations to begin in January 2020.

Hawaii Airport Authority Bill Dies, Again. For the second year in a row, a bill backed by airlines that would create an airport authority has died in the Legislature. Hawaii is one of only three states in which airports are operated and managed by the state Department of Transportation. (The other two are Alaska and Maryland.) Airlines have complained about bureaucracy and slow, convoluted procurement of new facilities and have argued that a self-supporting airport authority is a better model. Many legislators balked at losing direct control over airport decision-making, leaving the status quo in place for at least another year.

Politics Might Kill Mexico City’s New Airport. The $13 billion replacement for the too-small Mexico City International Airport is well along in construction. But depending on who wins July’s presidential election, it is at risk of being cancelled. The current front-runner—leftist Andres Manuel Lopez Obrador—has called for terminating the project if he’s elected, by filing legal challenges on account of alleged corruption. The candidate has proposed supplementing the existing airport with a new small airport north of the city, which airlines and airport supporters argue would be an ineffective solution to the airport’s lack of expansion capacity. Construction of the replacement airport is on track for completion in 2020.

Canada Abandons Airport “Asset Recycling”. After two years of study, including reports from Credit Suisse and Morgan Stanley, Transport Minister Marc Garneau announced in April that the Liberal government is “not moving ahead with [airport] privatization at this time.” The original concept was for the federal government to sell its ownership interest in the major airports, using the proceeds to invest in other needed infrastructure. This concept—asset recycling—has been used extensively in Australia in recent years. Several major airport authorities outspokenly opposed the plan, with only Greater Toronto Airports Authority expressing support.

London Luton Stake Acquired by AMP Capital. In April, airports investor AMP Capital purchased French fund manager Ardian’s 49% stake in London’s Luton Airport, for a sum estimated at close to £1 billion. The airport’s current expansion plan calls for increasing annual passengers to between 36 and 38 million by the late 2030s, from an expected 18 million this year.

Moody’s Concerned Over Chicago O’Hare Expansion. Rating agency Moody’s issued a warning last month about the increased debt level to be assumed by ORD in support of its $8.4 billion terminal expansion project. If, as expected, all of the new cost is bond-financed, that would increase ORD’s debt to close to $15 billion by 2022. And Moody’s calculates that this would lead to a cost per enplaned passenger (CPE) higher than comparable major hubs, potentially reducing its appeal for connecting passengers, which account for about half of all ORD enplanements.

Westchester Airport Privatization in Question. A change in the County Executive at the end of last year has put the airport privatization process on hold. The winning bid, from Macquarie, has lapsed, and new county executive George Latimer is still deciding whether to proceed to use the county’s slot in the FAA Airport Privatization Pilot Program. Options include holding a new bidding process, negotiating an agreement based on Macquarie’s late-2017 offer, or giving up its slot. One stated reason for the delay in moving forward was an election to fill the county legislature seat vacated by Latimer last winter when he became County Executive; that election took place April 24th.

Phoenix Moves Forward with Two P3 Projects. The City of Phoenix last month issued a request for qualifications (RFQ) for two design/build/finance/operate/maintain (DBFOM) projects at Sky Harbor Airport. One is for a new parking structure to replace a 3,000-space parking lot. The other is to DBFOM an upscale on-airport hotel, with meeting facilities, restaurants, and retail. The concessions could be up to 50 years, and bidders may propose to do one or both projects.

JetBlue Selects Fraport for JFK Terminal 5 Retail. In April, anchor tenant JetBlue Airlines announced that it had selected German airport firm Fraport (the world’s fourth largest airport operator, by revenue) to manage all retail operations in JFK Terminal 5. The contract is with Fraport USA, a company formerly known as AirMall that was started by the former British airport firm, BAA plc.

JetBlue Selects Team for JFK Terminal Expansion. In a project expected to cost between $2 billion and $3 billion, JetBlue has begun the process for a major terminal expansion project that would add 12 larger gates to the 29 narrow-body gates it already operates in Terminal 5. From 10 bids, JetBlue announced the selection of Vantage Airport Group and RXR Realty to lead the project. The airline is still in discussions with its landlord, the Port Authority of New York & New Jersey, on many details of the project.

Airline Buying 25% Stake in Moscow Airport. Qatar Airways has signed a memorandum of understanding with Moscow Vnukovo Airport to purchase a 25% interest in the facility. The deal was reported in Aviation Daily’s April 6th issue. Vnukovo is currently owned 50% by Russian private investors and 25% by the Russian government. It is the smallest of the three commercial airports serving Moscow, with 18 million annual passengers.

Trieste Airport Up for Sale. The Italian regional government that owns the Trieste Airport announced last month that it plans to sell a 45% stake to investors. The airport is currently 100% owned by the regional government of Friuli Venezia Giulia. The deadline for bids is June 6th. Trieste is located near the Slovenian border, and served 780,000 passengers in 2017.

FAA Contract Tower Moratorium Ends. Thanks in part to an unexpected budget increase from the recent Omnibus spending bill, the FAA has begun evaluating requests from small airports for contract control towers. At least eight applications for a contract tower have been on hold at FAA for the past six years, due to budget constraints. One of the newly hopeful cities is Boulder City, NV, which says its proposed tower has received the third-highest cost-benefit score in FAA’s review process. How soon FAA decisions will be made, and what it will be able to spend, remain unclear.

“Initially IATA cautiously welcomed privatization. That was the least they could do, given that airlines had the benefit of privatization before the airports. That was then. Now, de Juniac maintains, airlines realize that if airports operate commercially, the airlines risk looking like nothing more than tenants, instead of the Lord of the Manor. The only airport capital expenditure incumbent airlines will approve is for a moat. . . . To be fair to IATA, that is nothing new. The Australians, the Canadians, and the Europeans, to name but a few, have already made that clear. At the risk of mixing metaphors, that train has left the station. States cannot justify tying up their funds building infrastructure for airlines, many of whom are foreign. They have better things to do with their money, like schools and hospitals. It does not help that the airlines are so ungracious when it comes to constantly demanding still more, inevitably at someone else’s expense.” —Andrew Charlton, “You Say Privatization; I Say Privatisation. IATA Calls the Whole Thing Off,” Aviation Intelligence Reporter, March 2018

“In examining terrorism and counterterrorism, ‘how safe are we?’ is the right question to begin with. If it is determined in response to that question . . . that we actually are quite safe, we can move on to the next one. It was aptly posed by risk analyst Howard Kunreuther in 2002: ‘How much should we be willing to pay for a small reduction in probabilities that are already extremely low?’ That is, although we may want to maintain these agreeably low probabilities, are any gains in security that might be afforded by spending on additional security measures worth the funds expended? Are we safe enough already? Related, is it possible that we are spending too much to achieve this degree of safety?” —Mark G. Stewart and John Mueller, Are We Safe Enough? Measuring and Assessing Aviation Security, Elsevier, 2017, p. 16

“Current capital needs at large and medium hub airports, which carry 88% of all domestic traffic, are relatively low on a per-passenger basis. $3.04 per passenger for five years would cover all unmet capital needs at those airports for the next five years. Federal grants through the Airport Improvement Program will not adequately address the capacity needs of most fliers. This revenue source is vitally important to small airports, but not significant to the largest. New funding from the federal government to address capacity needs cannot be a one-size-fits-all solution. Making a real difference in capacity means investing billions in just a few major airports.” —Aviation Working Group, “Should the Federal Government Invest Heavily in Expanding American Airports to Relieve Congestion?” Eno Center for Transportation, January 2018

“If we really want to boost competition within the United States—the overwhelming majority of flights Americans take are domestic—then we need ‘cabotage,’ the right of foreign carriers to operate flights in the United States. While it may not be the case that Singapore Airlines is eager to provide daily service between Milwaukee and Albuquerque, it is possible that foreign carriers would have an interest in long-haul routes such as JFK-LAX or MIA-SFO, if only as a way to get paid to move airliners between major hubs. The domestic airline industry has seen years of consolidation and reduced competition. Time to let the Swiss, the Brits, and the Emiratis get into the market.” —Kevin D. Williamson, “Take Back the Skies,” National Review Online, Feb. 19, 2018

The 53-page “Legislative Outline for Rebuilding Infrastructure in America” includes long-overdue liberalization of the FAA Airport Privatization Pilot Program, as well as useful financing reforms. Now that airport privatization is an accepted global phenomenon, the plan calls for removing the limit of only 10 airports and the restriction to only one large hub airport, opening the door to any U.S. airport owner that wishes to recoup its investment in the airport while putting it in the operational hands of a world-class company. In addition, since airlines no longer adamantly oppose privatization (having approved proposed deal structures for long-term P3 leases of Midway, San Juan, and Westchester County airports), the plan would remove the double super-majority airline approval requirement, replacing it with a simple majority vote.

On the financing side, the plan calls for broadening eligibility for tax-exempt private activity bonds (PABs) with consistent rules for a broad array of infrastructure, including airports. It also calls for eliminating the Alternative Minimum Tax on PABs and removing both federal and state volume caps on PABs for public-purpose infrastructure, including ports and airports. It also calls for change-of-use provisions to preserve the tax-exempt status of bonds when a private-sector party buys or leases an infrastructure facility from a government owner. Had these changes been in effect when the San Juan Airport was leased under a long-term P3 agreement, the financing costs would have been lower, since the P3 team could have taken over debt service on the existing tax-exempt bonds, rather than having to issue new taxable debt for the acquisition.

If these changes get enacted by Congress, the United States would be extending an invitation to global airport companies and infrastructure investment funds, rather than confronting them with the obstacle course of the status quo pilot program and tax laws.

There was also a half-page section about possible divestiture of federal assets that “would be better managed by state, local, or private entities.” The list of seven examples included federally owned Reagan and Dulles Airports, leading to a media frenzy implying that the White House didn’t know the airports were already long-term leased to the Metropolitan Washington Airports Authority. Fitch Ratings pointed out that MWAA has $4.5 billion in bonds outstanding, and that the lease from the federal government runs to 2067. So privatizing these airports is unlikely.

Airport privatization, via long-term P3 lease concessions, is already a front-burner issue in some communities, with pending Pilot Program projects at various stages. The highest-profile case is St. Louis Lambert International, which would be the largest airport yet if it goes to completion. The City has selected Moelis & Company, Grow Missouri, and McKenna & Associates as its advisory team, with Moelis as the lead financial advisor, Grow Missouri underwriting the evaluation process, and McKenna assisting in identifying potential bidders. Those advisors must be approved by the Board of Estimate & Apportionment, and there is political opposition to Grow Missouri’s inclusion.

Westchester County had selected the proposal from Macquarie Infrastructure Corporation in November, but the new county administration that took office on January 2nd is reviewing the deal and may seek to modify its terms; it must also be ratified by the county legislature. Also proceeding toward FAA approval is Airglades Airport in Florida.

In parallel with these activities, the Airport Cooperative Research Program (of the Transportation Research Board) is gearing up for a follow-on study to its ACRP Report 66, “Considering and Evaluating Airport Privatization,” released in 2012. The objective of the new project is to expand upon that report to (1) identify lessons learned in US and international airport privatization models and (2) provide airport practitioners and policymakers with guidance on strategies and capabilities necessary to achieving the benefits on successful implementation of privatization. The working title of the project is “Implementing Airport Privatization: Guidance for Airport Decision-Makers.” It is designated as ACRP 03-46. An update from ACRP says that proposals have been received and are being reviewed by the project panel.

This year marks the 40th anniversary of the Airline Deregulation Act of 1978, which democratized air travel for the large majority of Americans. It also marks the 40th anniversary of the “temporary” program to cushion possible adverse impacts to small airports when airlines were no longer mandated to cross-subsidize money-losing flights to airports with very little traffic.

Alas, as pointed out in a new aviation brief from the Eno Center for Transportation, the Essential Air Services (EAS) program was made permanent in 1996—and from that date forward, it has ballooned in cost, growing from $35 million in 1995 to $271 million in 2016. The Eno report, “How Does the Federal Government Subsidize Air Service to Small Communities?” provides details on every small airport served as of 2016, and for each of them lists the distance to the nearest hub (less than 80 miles in some cases), the total passengers that year, and the subsidy per passenger (which ranges from a handful at less than $100 per passenger to as much as $778 in McCook, NE, which is 256 miles from the nearest hub airport).

Eno also points out several things I didn’t know about the EAS program. Although Congress years ago mandated that the maximum subsidy could not exceed $200/passenger for communities less than 210 miles from a medium hub, in 2006 the U.S. DOT stopped enforcing that rule! After some criticism, DOT in 2014 said they would resume enforcing it, but as of FY 2016 there were still 26 airports in violation. Furthermore, notes Eno, although DOT has criteria for considering adding new communities to EAS, none of them include cost. These factors are what lead me to dub EAS as a subsidy program that is out of control.

The FY 2019 budget proposal from OMB proposes a few minor reforms, aiming to reduce the subsidy total a bit. But to help Members of Congress contemplate more serious reforms, Eno provides a pie chart showing now much of the subsidy money goes to airports at various distances from a hub airport. Here are the numbers:

Distance
from hub

Number of EAS
Airports

Cost of Subsidies
($M)

Less than 100 mi.

9

$19M

101 to 150 mi.

26

$59M

151 to 210 mi.

20

$38M

Over 210 mi.

52

$112M

AK + HI

46

$50M

Thus, for a reform that retained subsidies only for airports 210 miles or more from a hub airport and for the special cases of Alaska and Hawaii, the subsidy total would be only $162 million rather than $278 million.

That’s important, because subsidies of this kind ought to come from general fund, not from other air travelers. The current EAS program in FY 2017 got $150 million from the general fund and another $104 million from overflight fees paid by airlines for air traffic services provided by the FAA. That user-fee revenue should be used for the capital and operating costs of the ATC system, not for subsidies to small airports. Much of the huge growth in EAS since 1995 has been facilitated by the “free money” from FAA overflight fees. That needs to stop. Congress should weigh EAS subsidies against all the myriad uses of discretionary general revenue, and decide which claims are most worthy of funding.

While some consumer groups’ negative reaction to the emergence of four merged US mega-carriers is excessive, the best hope for retaining the democratization of air travel generated by airline deregulation is to remove existing barriers to robust airline competition. Two recent developments are steps in that direction.

The first is the about-to-be-finalized replacement of legacy long-term airline lease agreements at Chicago O’Hare Airport. Those 35-year leases expire in May, and the city government (ORD’s owner) plans to replace them with modern leases. Legacy leases like those at ORD typically granted anchor tenants (American and United at ORD) exclusive use of large numbers of gates (whether they were fully utilized or not) and also gave them de-facto veto power over capacity expansions that would permit significant entry by new airlines. Those leases did not do much harm in the old days of CAB regulation, when that regulatory agency essentially ran an airline cartel, with very little new entry and with price competition forbidden. But ever since deregulation, those leases have served as significant barriers to entry—and they are gradually being replaced by shorter leases, generally lacking “majority in interest” clauses that give incumbent airlines veto power, and often providing for shared-use gates.

The carrot ORD is offering AA and UA is vastly improved terminals, as part of a total expansion yielding 72% more terminal square footage than at present. The program also includes addition of the final (sixth) runway under the airport’s O’Hare Modernization Program. AA and UA will be getting more gates, as will Delta and its Skyteam partner airlines. But importantly, so will discount carriers Alaska, Frontier, JetBlue, and Spirit. Altogether, ORD will get 35 more gates and two additional on-airport hotels. This adds up to a significant boost for airline competition at ORD.

The other change is so far just a proposal. Rep. Dave Brat (R, VA) last month introduced his Free to Fly bill (HR 5000). It would remove the anachronistic provision of US aviation law that limits foreign ownership of any airline flying domestic routes to 25%. In exchange for no restriction on ownership or board members, any such airline would have to set up a U.S. subsidiary and employ only citizens or other legal residents in providing domestic airline service. Advocates of airline deregulation, dating back to then-CAB Chairman Alfred Kahn, have long argued that airline competition would be more robust if non-U.S. airlines could fly domestic routes here. But that 75% U.S. ownership provision has always stymied such service from being offered.

Brat’s bill will likely face strong opposition from major airlines, but it has garnered a long list of supporters, including the Business Travel Coalition, the Club for Growth, FlyersRights.org, FreedomWorks, the National Taxpayers Union, Travelers United, and the U.S. Travel Association.

Thanks to a public-private partnership between Snohomish County, WA and Propeller Airports, the new passenger terminal that Propeller is building at Paine Field will open this fall with three airlines providing service: Alaska, Southwest, and United. Residents in the northern portion of the Seattle metro area will no longer be dependent on a long drive to SEA-TAC for quality airline service—at least to destinations in the western USA.

Alaska announced in January that it will initially serve eight cities from Paine Field, offering 13 daily flights. Those cities are Las Vegas, Phoenix, Portland, San Jose, San Francisco, Los Angeles, Orange County, and San Diego. United plans six daily flights, serving its hubs in Denver and San Francisco. And Southwest has announced initial plans for five daily departures, to cities yet unnamed.

Paine Field is located in Everett, WA, 38 miles north of SEA-TAC and 74 miles south of Bellingham. It is the site of the Boeing plant that produces 747, 767, 777, and 787 aircraft, and its main runway is 9,100 feet in length. The airport dates to 1936, when it was developed as a military base.

Propeller Airports, based in New York City, has tried twice to bring a competing airport to Delta-dominated Atlanta—once at Briscoe Field in Gwinnett County and later at Paulding Airport in Paulding County. Both of those attempts were defeated, after hard-ball lobbying by Delta and its political allies. In Seattle, Propeller is succeeding, with both political support and enthusiastic airline participation.

The New York Times ran a fascinating article on February 27th, “How Boston’s Airport Bounced Back from the Storm that Crippled JFK.” Reporter Patrick McGeehan explained that the same snowstorm that massively disrupted operations at Kennedy for several days. also hit Boston, with snowfall in excess of one foot at Logan International. Yet Logan reopened the next morning almost back to normal.

Both airports are managed by Port Authorities, which have been found by economic studies to be the least productive form of airport organizations (note: single-purpose airport authorities are much better). But as McGeehan carefully explained, the two airports are managed in very different ways. JFK operates an extremely decentralized system, under which airlines or groups of airlines manage the individual terminals, almost as if each was the airport’s sole terminal. When a major snowstorm or other disaster occurs, it appears to be every terminal for itself—and that’s what happened during the January debacle.

By contrast, Massport (the port authority that runs Logan) practices airport collaborative decision-making, a policy the FAA supposedly encourages and participates in with airports. As McGeehan reported, every morning airline and Logan airport officials meet together to review information about that day’s operations, including the weather but also things like problems with a Jetway or scheduled runway maintenance. Each of Logan’s four terminals has a manager, who reports to Ed Freni, Massport’s aviation director, who leads the daily meeting.

Nothing like that exists at JFK. Each airline-managed terminal was on its own. As Jason Rabinowitz put it in the New York Post (January 16th), “Essentially, each terminal has become its own mini-airport, connected only by taxiways and the shared misery among passengers. There is no central command during irregular operations to contain issues.” Terminal 1, in particular, was overwhelmed by more flights than its 11 gates could handle, leading to planes stuck on the tarmac for up to seven hours. Arrivals at that terminal were than banned for two days, creating even larger backlogs of deferred or cancelled flights. Logan ended up handling a number of incoming flights that were turned away from JFK en-route.

Reporter McGeehan quoted Port Authority Aviation Director Huntley Lawrence as admitting that the agency had paid too little attention to passengers, since it turned over the terminals to airline management in the 1960s. “No one ever dreamed that meant we would abdicate control of the customer experience at our airports. But we did.”

In his New York Post op-ed, Rabinowitz quoted long-time aviation consultant Robert W. Mann as saying, “One way or the other, if the airlines will not act in their own interests to mitigate poor outcomes, then the Port Authority, which . . . takes a black eye every time airlines fail to act, must act to host a solution.” But Rabinowitz doesn’t think that’s the answer. As is well known, over its long history of running JFK and LaGuardia on behalf of airport owner New York City, the PA has used the airports as cash cows, taking large sums of money from them to use for building the World Trade Center and its replacement, as well as numerous money-losing “economic development” projects.

Former New York Times reporter John Tierney reviewed some of that history in a powerful article last year (“Making New York’s Airports Great Again,” City Journal, Winter 2017). Citing the transformation of San Juan International thanks to a long-term public-private partnership lease, Tierney suggested a similar solution for the Port Authority airports. In a 2017 study for the Manhattan Institute, I had proposed that approach as a way to insulate the airports’ revenue from diversion and bring about a management approach focused on the airports’ customers. And based on recent airport privatizations worldwide, I estimated the potential market value of JFK at something over $7 billion.

And that is what Rabinowitz recommended in his op-ed. “The time has come for the de Blasio administration to take a look at privatizing the airport—allowing one company to be a unifying force for all of its terminals. . . . New Yorkers should no longer accept the PA’s mind-boggling costs and inept management.”

Atlanta Airport: Out of Electric Power but Not Out of Monopoly Power By Clifford Winston, Brookings Institution

The power outage that recently shut down operations at Hartsfield-Jackson Atlanta International Airport was the latest in a long history of turbulent events in U.S. airline travel. Some travelers believe the chaos began when the industry was deregulated in the late 1970s, expecting that profit-hungry airlines would do almost anything to fill their planes with passengers, even though some might have to sleep on an airport terminal floor and miss meals when their flights were cancelled.

The truth is that the nation is fortunate that deregulation has generated as many improvements in air travel as it has because deregulation has been compromised from the get-go by policymakers’ failure to allow aviation infrastructure to evolve in conjunction with changes in airline operations in a highly competitive environment. In particular, commercial airports have remained in the public sector, with virtually no incentive to improve their operations in ways that would both increase airline competition and help airlines provide better service to air travelers.

Although the Federal Aviation Administration has identified the Atlanta metropolitan area as needing a second airport, Hartsfield-Jackson has succeeded in keeping its monopoly position to the delight of its stakeholders, which include its hub carrier, Delta Airlines. Delta benefits, of course, from being able to elevate its fares in the absence of competition from airlines that would serve a second airport.

Hartsfield-Jackson continues to behave like the inefficient public monopolist that it is. Consider its approach to backing up its primary underground electrical facility. Effective backup could have prevented the massive and lengthy power outage that shut down airline operations and caused more than 1,000 flights to and from the airport to be cancelled. Instead of working with Georgia Power to locate the backup electrical equipment physically apart from the primary equipment, the airport allowed the utility to locate it in an adjacent room, which rendered the backup equipment useless when a fire broke out in the primary facility. The subsequent power outage lasted much longer than it would have if the backup were working.

In the information technology (IT) world, the Atlanta airport’s approach was analogous to putting critical software and data in adjacent rooms—something that would have been regarded as incompetent in the 1960s. Off-site data protection, including storage of backups, has long been part of IT disaster recovery. Apparently, the airport’s management did not have the incentive to learn a basic lesson from IT that it is a bad idea to put backup infrastructure in the same place as the equipment that it is intended to back up.

Delta Airlines, other airlines, and airline passengers incurred the significant cost of the cancelled flights during the outage. CNN reported that one airline was telling passengers that it would be five days before they could get a flight out. In addition, the cancelled flights caused problems at other airports and generally disrupted air travel across the United States. But did Hartsfield-Jackson have to worry about losing a customer because of this calamity? What other commercial airport in the Atlanta area were airlines and air travelers going to use?

Similar to countless other markets, the way to incentivize airports to improve their operations is to introduce private sector competition. Private airport competition already exists in certain foreign cities, such as London, and it is feasible and desirable in the major metropolitan areas of the United States. Some major cities already have three public airports, such as Reagan National, Dulles, and BWI, in the Washington, D.C. area. Those airports compete to some extent, but why not allow them to explicitly engage in price and non-price competition for airlines and air travelers?

A private airport would have the strong financial incentive to avoid the backup problem that greatly contributed to the power outage at Atlanta. Importantly, if such a problem occurred, airlines and other commercial airports in the metropolitan area could work together to reduce the cost of a major disruption to travelers. In addition, private airport competition would address inefficiencies that have long compromised air travel in the deregulated era, including: (1) the failure to use the price mechanism to reduce travel delays by charging higher landing and takeoff fees during peak travel periods, (2) the lack of available gates for new airline entrants at certain airports, (3) the interminable delays in building new runways, and (4) the slow adoption of technological advances to improve airport security.

Of course, many cities are served by only one airport. Under privatization, those airports would appear to have monopoly power, which would allow them to charge airlines excessive prices for runway and terminal use and give them little incentive to provide high-quality services. But the ability of an airport—even if it is the only airport serving an outlying area—to behave as a monopolist is constrained by its need to be integrated into an airline’s entire network. Thus, if an airport attempted to set monopoly charges, a major airline could simply exclude it from its network or play it off against another airport in an outlying area to reduce charges.

In the case of the Atlanta metropolitan area, I am confident that, in a privatized commercial airport environment, it would have little trouble attracting an entrepreneur to build a second airport to compete with a privatized Hartsfield-Jackson Airport. I am also confident that both airports would require Georgia Power to build a backup electrical system well away from the primary electrical equipment.

Orlando Considering Private Screening. Frustrated by long lines and long waiting times at TSA checkpoints, the board of the Orlando International Airport is considering replacing TSA screening with a private screening contractor, under the agency’s Screening Partnership Program (SPP). But due to several board members being unconvinced, along with a large turnout of TSA screeners at the Feb. 22nd board meeting, the board members voted to wait two months before applying for SPP. In the interim, airport management will review the status quo with TSA to see if it can come up with meaningful improvements.

ACS Consortium Wins LAX People Mover Competition. Los Angeles World Airports has selected the LINXS consortium, headed by ACS and Dragados, for a $1.95 billion design-build-finance-operate-maintain P3 concession to implement an elevated automated people mover (APM) linking the central terminal area with parking facilities, a new rental car center, and a light-rail airport station. The 25-year DBFOM concession will likely be financed initially with short-term bank debt, and long-term with tax-exempt private activity bonds (PABs). Commercial close is expected in April and financial close in June. The APM is scheduled to open in 2023.

TSA Changes the Math on PreCheck. Aviation security consultant Ken Dunlap points out in his Feb. 26th blog that TSA will henceforth measure PreCheck adoption based not on the percentage of total air travelers signing up but rather on the percentage of frequent travelers that do so. Dunlap points that while detailed data exist on total air travelers, “frequent” travelers has no precise definition, which he says introduces “an eye-watering fudge factor” that TSA can exploit. He makes a good case that the better target—for both risk reduction and cost-saving—is the fraction of total air travelers being pre-screened in advance. (http://securitydebrief.com/2018/02/26/tsa-changing-math-precheck)

Denver Terminal P3 Reaches Financial Close. Denver International Airport’s $1.8 billion Great Hall terminal redevelopment project reached financial close on Dec. 21, 2017. The project will greatly expand the current landside terminal, replacing the TSA screening area and adding extensive retail space. The P3 team is headed by Ferrovial Airports, the largest shareholder in London Heathrow Airport. Under the 30-year (after construction) P3 concession, Ferrovial will share revenue from the terminal with the Airport on an 80% airport/20% developer basis. The deal is being financed based on developer equity and a mix of short-term and long-term private activity bonds. Fitch has rated the bonds BBB.

Stewart Airport Being Renamed and Expanded. The once-privatized Stewart International Airport, now owned by the Port Authority of New York & New Jersey, will henceforth be New York Stewart International Airport. The Port Authority is adding 20,000 sq. ft. to the terminal to accommodate a Customs & Border Protection facility, in view of the addition of trans-Atlantic airline service to the airport by Norwegian Air, whose flights increased 2017 passenger volume by 60% to 440,000. The project budget is $30 million.

Katco Slams TSA on Misuse of PreCheck. Rep. John Katko (R, NY) strongly criticized TSA for continuing its practice of “managed inclusion,” under which air travelers who have not been vetted and accepted as PreCheck members are moved from regular screening lanes into PreCheck lanes when the regular lanes are backed up. TSA has those passengers sniffed by an explosives-detection dog, but Katko points out that this cursory (and not always accurate) inspection is not the same as passing a background check. TSA’s Stacey Fitzmaurice said the agency is trying to “draw down” the number of non-members going through PreCheck lanes.

Vinci Wins Tesla Airport Concession in Serbia. France’s Vinci Airports was the winner of a competition to upgrade and manage the Nikola Tesla Airport serving Belgrade, the capital of Serbia. Under a $1.7 billion deal, Vinci will invest $1.2 billion in expanding and modernizing the terminal and upgrading the runways, while also providing $500 million to the government. The DBFOM concession has a term of 25 years. Vinci operates 35 airports worldwide, including 12 in France, 10 in Portugal, Santiago in Chile, and both Kansai and Osaka in Japan.

Navi Mumbai Airport to Be Developed by GVK. In January a joint venture of GVK Power & Infrastructure and state-owned City & Industrial Development signed a concession agreement to develop a second airport for Mumbai, with an initial capacity of 10 million annual passengers, expandable to 60 million. The DBFOM concession is for 30 years, with a possible 10-year extension. Estimated cost of the airport is $2.4 billion.

Competitive Privatization of Paris Airports? The Chief Commercial Officer of low-cost carrier Ryanair is urging the French government to take a leaf from UK privatization experience. Instead of privatizing Aeroports de Paris as a single entity, he urged that the two main Paris airports be sold separately, enabling them to compete more openly. That change was made belatedly in the U.K. More than 20 years after the Thatcher government privatized the British Airports Authority (BAA) as a unit, a subsequent government required the divestiture of London Gatwick and London Stansted, which now compete with London Heathrow. According to Aviation Daily, the French government is planning to privatize Aeroports de Paris as a single company.

Cross-Border Trade from Phoenix-Mesa Gateway Airport. A new e-commerce hub encompassing 800,000 sq. ft. of air cargo operations space and a million square feet of office space will be built at Phoenix-Mesa Gateway Airport. The business model is that the facility will have Mexican customs officers on site, who will screen all online purchases from Amazon and other e-tailers prior to air shipment to any airport in Mexico. Air freight between the United States and Mexico is currently $390 million per year, but is projected to grow rapidly.

Fraport Sells 10% of Greek Airports P3 Concession. Marguerite Fund, which invests in infrastructure projects on behalf of European development banks, has purchased a 10% stake in the 40-year concession under which Fraport is to upgrade and operate 14 airports in Greece. Fraport has agreed to invest $482 million in the airports by 2021. The acquisition of a portion of the Greek airports concession completes the Fund’s current asset acquisitions.

Norwegian Seeks Additional Gatwick Slots. Long-distance low-cost carrier Norwegian in December acquired 28 weekly slots at London Gatwick Airport, to facilitate a planned expansion of trans-Atlantic service with the 787s it has on order. But CEO Bjorn Kjos told a London briefing in February that it needs additional Gatwick slots to fulfill its current service plans. The fast-growing airline is already the third-largest airline at Gatwick, with 4.6 million annual passengers. It plans to launch flights this year to Argentina, Austin, and Chicago.

Meridiam and ADP Purchase Majority of Jordan Airport Concession. French financial company Meridiam and Aeroports de Paris have paid $267 to acquire a majority interest in the 25-year concession for Jordan’s Queen Alia International Airport. The concession was agreed to in 2007, and the original consortium invested $850 million in airport improvements. The airport is growing at about 10% per year.

World’s Most Valuable Airport Company: Airports of Thailand. Bloomberg reported in January that based on stock market valuation, the world’s most valuable airport company is Airports of Thailand, with a market capitalization of $31 billion. The previous most-valuable company was recently privatized Aena, SA, which operates all the large airports in Spain.

Orlando Starts Construction of $2.1 Billion South Terminal. The long-planned South Terminal at Orlando International got under way in January. Development on the site already includes a new parking structure, multi-modal ground transportation terminal, and a people-mover connection to the existing North Terminal. The South Terminal will open with just 16 gates, but plans call for it to expand as needed to as many as 120 gates. That first phase is scheduled to open in 2020.

Gary Airport Refurbishing Runway, Adding Customs. Gary/Chicago International Airport is repaving (with concrete replacing asphalt) its main runway and is well along on construction of a new Customs & Border Protection facility at the airport. The latter will permit international air travelers who depart from Gary to come back to Gary, rather than to a City of Chicago airport that has such facilities.

Cross Border Xpress Wins Air Transport World Award. The innovative air terminal on the U.S. side of the border with Tijuana’s airport is the recipient of the 2018 Passenger Experience Achievement award presented by Air Transport World in February. Winner of the Value Airline of the Year award was Norwegian Air, which launched 20 trans-Atlantic routes in 2017.

“Our overall judgement (readers are invited to visit our travel blog, Gulliver, to dispute it) is that, adjusted for national income per head, several busy American airports would be contenders for worst in the world. Washington Dulles has the worst-designed ground transport: travelers must enter and leave a mobile pod by the same door, so everyone crowds round in hopes of getting off first, thus blocking it. JFK is the main gateway to the world’s capital of consumerism, yet scarcely any retail therapy is available to treat travellers’ boredom. But Miami is surely worst of all. The queues at passport control take nearly as long to navigate as Leif Erikson took to cross the Atlantic in a longboat.”
—”The Departure Gates of Hell,” The Economist, January 6, 2018

“In a 2013 paper by Jia Yan of Washington State University and Tae Hoon Oum of the University of British Columbia, economic indicators of underperformance at U.S. airports identified the effects of corruption in the misallocation of resources, personnel decisions, and more. The transfer of airports from municipal governments to quasi-autonomous airport authorities did little to prevent malfeasance, but the authors concluded that airport privatization might help: ‘Private airports are better insulated from political influences and give managers stronger incentives to exploit efficient inputs allocation. Also, internal organization of private airports is expected to function better than airport authorities especially in highly corrupt environments.'”
—Kevin D. Williamson, “Take Back the Skies: Five Ideas to Improve Air Travel,” National Review, Feb. 19, 2018

“[Control tower competition] facilitates things like the introduction of remote technology, and that in turn means that air traffic management can be digitized. That is good, in this world of big data, but scary if you are an ANSP [air navigation service provider], in this world of big-data players such as Google. Scary for ANSPs is not necessarily bad. They have been sitting smugly behind their monopoly for a long time. For the airports, for the airlines, for the passengers, it opens the door. It is what happens next that is exciting. If control tower service is liberalized, the airport becomes the customer. The ANSP becomes the supplier—or, more accurately, becomes one of the potential suppliers. That changes the balance of power and the balance of bargaining position.”
—Andrew Charlton, “Reforming ATM One Airport at a Time,” Aviation Intelligence Reporter, November 2017

December’s unprecedented 11-hour shutdown of Atlanta’s Hartsfield-Jackson International Airport raises disturbing questions about airport vulnerability. As we learned soon after the incident, the shutdown was caused by a power surge that knocked out both primary and backup electricity, leaving the entire airport powerless. Georgia Power CEO Paul Bowers said the design of that system “is typical of how major power networks operate”—but that is intolerable at critical facilities such as airports, hospitals, and public safety dispatch centers. A basic principle of good system design is redundancy—if one system fails, a backup takes over.

A Wall Street Journal article on this fiasco (Dec. 19, 2017) quoted a vice president of TSi Power saying that a separate backup switch big enough for a facility such as ATL would cost “several million dollars.” Let’s compare that figure with an estimate of the economic harm caused by the shut-down.

Delta CEO Ed Bastian told Aviation Daily (Jan. 2, 2018) that the airline estimates the shutdown cost it $25-50 million. That’s a very low-ball estimate. Delta’s 2016 IT system failure at ATL led to 2,300 cancelled flights and an estimated $150 million loss. Since DL cancelled 1,400 flights this time, the December loss would be more like $91 million. And that’s just Delta, which handles 73% of ATL’s passengers. Adding the other 27% would bring just the airlines’ loss to around $125 million.

Then there’s the economic harm to the passengers, most of whom had to wait for several days to get a replacement flight—or to cancel their trip altogether. If the DL flights averaged only 100 passengers each (including RJs), that would be 140,000 passengers. If each one’s out-of-pocket cost averaged $200, that’s $28 million in DL passenger losses; for all ATL passengers, the total would be $38 million. So the total of airline and passenger losses would be around $163 million. That compares with “several million dollars” for a redundant backup switch. That expenditure would be a rounding error in ATL’s $500 million operating budget.

Some heads should roll over this—but whose? For one thing, the FAA is the airport safety regulator, and one of its requirements is that the airport has a backup emergency electricity plan approved by the agency. Who approved ATL’s single-point-failure electricity supply? And who, in the ATL management, was asleep at the switch for this disaster in waiting? And given how much clout anchor tenant Delta is known to have at the world’s busiest airport, why weren’t DL’s facility and operations people aware of this extreme vulnerability?

By the way, the Wall Street Journal article pointed out that the ATL electrical system design is not necessarily “typical.” Dallas/Ft. Worth International is supplied by two separate power lines, one entering from the north and the other from the south. And either one can power the entire airport if one fails.

I’ve left for last the dire security implications of this fiasco, ably pointed out by Clive Irving of Conde Nast Traveler the day after the blackout. A few choice lines from his DailyBeast post:

“Just imagine this as a classic plan for phase one of a terrorist attack: Render the target blind. None of the defenses are operational. Thousands of people are trapped in restricted spaces without directions about how they can find an exit. As chaos spreads, nobody knows whom to turn to for information. The communications blackout is as complete as the power blackout. Given this situation, a small band of suicide bombers could roam freely and commit mayhem and massacre on an unprecedented scale.”

That TSA has apparently not looked into this possible single-point vulnerability of America’s airports speaks volumes about this country’s fragmented approach to airport security (TSA in charge of passenger and baggage screening, and the airport in charge of everything else.)

Both FAA and TSA have work to do on this problem. And so do airports and airlines.

Over the last two years, TSA’s PreCheck trusted-traveler program has added 2.2 million people, bringing its total enrollment to 5.7 million. That’s good, but the program’s potential is much larger. In 2015 the agency set an ambitious goal of expanding PreCheck to 25 million air travelers by 2019, but several serious problems have called that goal into question.

In a December report, the DHS Office of Inspector General (OIG) focuses on one of those problems (“TSA’s Adjudication Resources Are Inadequate to Meet TSA PreCheck Enrollment Goals,” OIG 18-27, Dec. 5, 2017). As TSA ramped up marketing the program to air travelers and expanding the enrollment centers operated by its contractor (Morpho) in 2016, applications surged to unprecedented levels. But TSA’s internal processing was unable to cope with the huge influx.

As the OIG report explains, about 26% of all PreCheck applications are not cleared by a set of automated background checks; that subset has to be manually reviewed by TSA’s Adjudication Center. That turned out to be a major bottleneck, for two reasons. First, the work is apparently boring, so recruitment is difficult and there is high staff turnover. When the marketing campaign ramped up in May 2016, 12 of the 27 staff positions were vacant. TSA tried to recruit more full-time staff, and when that proved difficult, obtained fill-in “detailees” from elsewhere in TSA and DHS, but this failed to solve the problem. Instead of beginning manual review within the target of five workdays from receipt, the average delay soared to 50 workdays by September 2016.

The other problem is a cumbersome information processing system that requires staffers to manually extract thousands of case numbers from the vetting system, enter them into spreadsheets, and email those to the adjudicators; the latter must manually extract case numbers from the spreadsheets and enter them in a different system to review the vetting results and begin the adjudication process. (I’m not making this up!)

The OIG report, therefore, made two obvious recommendations, both of which TSA has agreed to implement:

Expand the adjudication workforce of full-time employees and give them better tools to work with;

Replace the manual data input and transfer by moving it to an existing automation platform called Technology Infrastructure Modernization.

TSA has taken steps to implement both recommendations, but OIG considers them both still open until TSA submits data documenting that the problems have been solved.

The OIG report mentions in passing (p. 4) that TSA “had planned to expand the number of [PreCheck] enrollment service providers to four by the second quarter of FY 2017, but TSA withdrew its Request for Proposals in October 2016.” In hindsight, had those additional enrollment providers gotten under way in mid-2017, the expanded number of applications would have made the processing problems even worse.

But as noted in the previous issue of this newsletter, a bill approved last fall by the Senate Commerce Committee (the TSA Modernization Act) would require TSA to contract with four private-sector entities to market and facilitate enrollment in PreCheck. It also sets a goal of 15 million members by FY 2020. Importantly, it would permit enrollment without the need for collecting fingerprints from applicants, if contractors can demonstrate to TSA that vetting based on other means will provide equivalent security. If that works, it could make enrollment far less of a hassle than it is now, making the 15 million goal more attainable.

A coalition of eight travel industry groups, including the Global Business Travel Association and the U.S. Travel Association has sent a letter to Senate Majority Leader Mitch McConnell (R, KY) and Minority Leader Chuck Schumer (D, NY) urging passage of the measure, but it is strongly opposed by the existing monopoly provider, Morpho.

The perennial battle between airports and airlines over an increase in the local airport self-help user fee (Passenger Facility Charge) is again at a fever pitch. The Senate’s 2018 transportation appropriations bill provides for an increase in the federal cap, which is currently the same $4.50 that has been in effect since 2000. The Senate bill would increase the cap to a maximum of $8.50, but applicable only to the airport of origin, not to any connecting airports. In exchange for this potential new revenue, the bill also calls for large hubs (which could raise the most revenue from such an increase) to forego all “entitlement” funding from the federal Airport Improvement Program (AIP).

As I see it, this would be a welcome step toward allowing airports to become self-supporting, reducing their dependence on (often-politicized) federal airport grants. A similar, bipartisan, bill was put forth earlier this year in the House, by the interesting duo of Rep. Peter DeFazio (D, OR) and Rep. Thomas Massie (R, KY). Their bill, which never came to a vote, would have eliminated the federal cap altogether while eliminating all AIP grants for large hubs.

The airlines continue bamboozling fiscal conservatives into opposing such PFC measures by referring to them as “federal tax increases.” And while nearly all center-right think tanks support airport self-help via local PFCs, two conservative taxpayer groups—Americans for Tax Reform and National Taxpayers Union—continue to sing from the airlines’ hymnal.

One airline argument is that a PFC increase, by increasing the cost of an airline trip, would reduce demand for such trips (basic price elasticity). Testimony posted on the Airlines for America (A4A) website states that “increasing the PFC to $8 or higher would cost [air travelers] in excess of $2.5 billion annually,” decreasing the likelihood of airline trips. Yet this ignores the fact that airlines have been ramping up various passenger fees that are not included in the ticket price because they are nominally optional—but are paid by large numbers of passengers. Aviation reporter Susan Carey pointed out in a Wall Street Journal news article last month that airline fees for checked luggage and ticket changes alone raised more than $7 billion for airlines in 2016, dwarfing the impact of a PFC increase. Yet airline travel is booming.

Another airline argument is that airports already have plenty of money to spend on terminal and runway expansion. When countered by airport numbers showing that construction plans exceed current resources, A4A points out that there is a large unobligated balance in the federal Airport & Airways Trust Fund that could be used to expand AIP grants. The current FAA budget puts the unobligated balance at around $5 billion—but there is zero chance that the Office of Management & Budget would allow FAA to request using some or all of that balance for a larger Airport Improvement Program, because of OMB’s focus on holding down federal spending.

A new complication was dropped into this debate in early December when the Congressional Budget Office (CBO) and Congress’s Joint Committee on Taxation (JCT) argued that the Senate bill’s PFC cap increase would lead to federal revenue losses of $944 million over the next decade. Say what? The convoluted logic goes as follows (as explicated by Eno Transportation Weekly‘s Jeff Davis): Airports will issue new revenue bonds backed by the increased annual PFC revenues. Like most airport bonds, those bonds will be tax-exempt, and therefore the bond buyers will have less taxable income than if they had bought an equivalent amount of taxable bonds instead. Hence, the federal loss of tax revenue compared with the no-PFC-increase status quo.

Logically, the average of $94 million of annual lost revenue is a rounding error in the massive federal budget. In addition, the volume of tax-exempt bonds fluctuates year by year far more than the small increase likely to come about if all airports increase their PFCs by the maximum allowed and use all the revenue to issue tax-exempt revenue bonds, as assumed by CBO.

Alas, this kind of CBO/JCT reasoning is taken seriously in Congress, triggering application of a federal PAYGO provision that requires legislation leading to increased deficits to be offset in the budget—unless waived by 60 votes in the Senate. Since there is bipartisan support for increased airport infrastructure investment, Davis speculates that if the Senate PFC provision is adopted in the final transportation appropriations bill, there’s a decent chance of a 60-vote waiver. But this kind of nonsense should make larger airports even more determined to regain full control of their funding.

In the wake of mergers that reduced the “major” U.S. air carriers to just four—American, Delta, Southwest, and United—there were many predictions that passengers would be the losers. The main fears were that air fares would be increased and that air service at medium and small hubs would be cut back.

The Eno Center for Transportation published good news on this subject on November 29th. In the sixth of a series of briefs called Aviation Insights, Eno answered the question: “Where are airline passengers getting the best service?” The data were prefaced by a graph from the American Consumer Satisfaction Index, which shows that for the airline industry, that index has increased from 70.3 in 1994 to 76.8 in 2016 and is now slightly higher than the 75.0 average for all industry sectors.

In its new research, Eno ranked 47 metro areas with large and medium hub airports. Using mostly federal data sources, the researchers created a FlyScore for each metro area, based on four factors (each given the same weight): number of direct destinations, total number of domestic flights, extent of competition, and average one-way fare level. Chicago emerged as number 1, with a FlyScore of 94 out of a possible 100, with Denver, Los Angeles, Dallas, and New York in the next four places. Of the top five, all but Denver have multiple airports, which facilitates competition and lower fares. Interestingly, there is no visible correlation between an airport being a “fortress hub” and its FlyScore—both Atlanta and Charlotte score in the top 10, despite being the only airport in their respective metro areas and being a fortress hub (for Delta and American, respectively).

It’s possible to quibble with aspects of the methodology. Baltimore (ranked 34th), San Jose (40th), and Ontario/Riverside (47th) each scored relatively poorly, but each is functionally part of a larger metro area and provides a competitive alternative to its other airports. That is a factor in the high scores of Chicago, New York, Los Angeles Dallas, Houston, San Francisco, and Miami. Also, the scoring reflects only domestic air service, which makes the comparison of large and medium airports fairer, but understates the benefits of a metro area having extensive international service.

I also find it encouraging that industry analysts expect favorable air-fare trends to continue. Bloomberg’s George Ferguson in late November released air fare trend forecasts for 2018, expecting downward air fares in domestic, trans-Atlantic, and trans-Pacific markets, with only Latin America showing increases. The major reason for the downward trends is increasing competition.

In the United States, competition is increasing from Alaska, Allegiant, Frontier, JetBlue, and Spirit, all of which are buying more planes and increasing service. Fast-growing Frontier in November ordered an additional 124 Airbus A320neo planes and projects a tripling of size over the next decade. In the next six months, it says it will add 30% more destinations to the 80 it already serves in the United States, Canada, Mexico, and the Dominican Republic. Media focus only on the four “big airlines” doesn’t reflect the growing competition in the air.

International air travel is also being affected by increasing competition—with relatively new low-cost, long-haul carriers such as Norwegian and Wow offering unprecedented no-frills low fares. While these carriers do serve traditional gateways such as Los Angeles and New York, they are also providing trans-Atlantic nonstop flights from airports such as Austin, Cincinnati, Fort Lauderdale, Hartford, Orlando, Pittsburgh, and Reno. Since 2012, according to U.S. DOT’s Bureau of Transportation Statistics, the airports showing the most international traffic growth are all from mid-size metro areas. At an aviation conference last August, Don Casey, Senior VP for Revenue Management at American Airlines, said that trans-Atlantic low-cost carriers have had a “material” effect on the fares charged by legacy carriers.

All of this is good news for U.S. air travelers and the airports that serve them.

As I reported last issue, the DHS Office of Inspector General in September released a one-paragraph unclassified summary of its latest red-team effort to test the accuracy of TSA checkpoint screening. No figures have been released, but in the wake of several classified briefings to relevant congressional committees since then, the key number was leaked: screening failures occurred about 80% of the time in 2017 red-team testing, only marginally better than the 95% failure rate from OIG’s 2015 tests.

While better screener training may help, the best bet at this point seems to be replacing conventional two-dimensional X-ray machines with 3-D computerized tomography (CT) scanners, comparable to the larger CT scanners now used in nearly all checked baggage screening. CT scanners are faster and more-accurate than X-rays, and because they can assess the density and chemical composition of items in luggage, they may make it feasible for passengers to leave liquids and electronics in their carry-on bags at checkpoints.

CT scanners from several manufacturers are in use at a number of major European airports, and TSA and several airlines have live testing under way at a handful of U.S. airports. At a late-November hearing of the House Homeland Security Committee, the chairman, Rep. Michael McCaul (R, TX), pushed for TSA to begin installing CT scanners at checkpoints nationwide. DHS Acting Assistant Secretary Elaine Duke gave two reasons for this not being feasible at this point. First, she said, the algorithms needed for the machines to identify prohibited items are still being developed. That sounds questionable, given the CT scanners in routine use at Amsterdam Schiphol, Singapore Changi, and other airports in Europe, Australia, and even South Africa.

Duke’s second reason was cost. At around $300,000 apiece, CT scanners are about 50% more expensive than X-ray scanners. Said Duke, “We do not have the funding to deploy at every airport . . . to buy for every airport would require much more than a reprogramming [of existing TSA funds].” But that is something Congress could fix. Rep. Bennie Thompson (D, MS), the committee’s Ranking Member, said that the $1.28 billion a year from airline ticket security fees that now goes to the general fund for deficit reduction could—and should—be used for aviation security. “This money could be used to invest in new security technology and a fully staffed and effectively trained workforce.”

The numbers support Thompson’s proposal. TSA has about 2,200 screening lanes at U.S. airports. At $300K apiece, it would cost about $660 million to equip every single one with a CT scanner to replace its X-ray scanner. That’s about half the annual take of the amount from the security fee used for deficit reduction, making it an onerous tax on air travelers, instead of an actual user fee to give travelers better security. Congress should enact this change in 2018, and TSA should issue RFPs to the five current producers of checkpoint CT scanners.

In reporting on the annual European Slot Conference, held in early November in Madrid, the reporter for The Economist pulled back the rug and showed what was beneath it. The headline in the print edition was “Airport Heist,” while the online version said it more gently: “The rules on allocating take-off and landing slots favor incumbents.”

For decades, airline and airport representatives have gathered to coordinate flight schedules for the coming year. As the reporter put it, “Instead of letting airports decide who would use their runways and when, the system was designed to have schedules hammered out by committees of airlines.” But by the 1960s, European airports started reaching capacity, so the committees’ role changed to that of deciding who gets the best slots. Since the 1970s, this is mostly done following the International Air Transport Association’s grandly named “Worldwide Slot Guidelines.” They start from the premise that airlines, most of which got their slots at no charge decades ago, somehow own them, though they were actually created by airports’ decisions to invest in runway and terminal capacity.

Over time, the European Union has tried to impose rules easing the resulting near freeze-out of non-legacy airlines. One aspect is a use-if-or-lose-it rule requiring a slot-holder to use each slot at least 80% of the time or it will be re-allocated to another airline. And supposedly, if an airline stops using a set of slots (change of business focus, bankruptcy, etc.), the slot guidelines provide that half the freed-up slots be allocated to new-entrant carriers. But these rules are easy for incumbents to fiddle, as the article demonstrates. One way to meet the 80% rule is to fill in the schedule with commuter planes carrying few passengers; another is to operate “ghost” flights that produce little or no revenue but keep the slot occupied.

Some economists favor auctioning off unused slots, but in some countries airlines are able to trade or sell slots to one another, but usually not to low-cost carriers. That still protects the incumbents, as a group, from serious competition.

In two recent cases, incumbent carriers have taken advantage of airline bankruptcies—Monarch Airlines in London and Air Berlin in Germany. International Airlines Group (parent of British Airways), managed to buy all Monarch’s slots at London Gatwick Airport, with the proceeds going to help pay off Monarch’s creditors. Other airlines were apparently not given an opportunity to bid. And Air Berlin’s large slot-holdings at Berlin’s Tegel Airport were quickly bought by EasyJet, to the dismay of competitor Ryanair, which said it is prepared to invest up to $1 billion on them.

So it’s hard to disagree with the assessment of Britain’s competition office that the slot system “creates rigid incumbent slot holdings,” raising barriers to entry for newer airlines. As aviation consultant Andrew Charlton puts it, the IATA slot guidelines are “a naked attempt to distort the market.”

Fortunately, The Economist does suggest a more competition-friendly alternative. It quotes economist Nicole Adler of the Hebrew University of Jerusalem, who favors congestion pricing of runways. The magazine also notes that London Gatwick uses a version of such pricing, which has helped this single-runway airport cope with a 50% increase in passenger volume since 2010. The pricing “has encouraged airlines to make fuller use of their slots and to release underused ones to new entrants.”

As I’ve written previously, runway pricing is far better for passengers than the slot system. Governments that want robust airline competition should encourage runway pricing, not the “worldwide” slot system.

Macquarie Selected for Westchester County Airport Lease. A bipartisan task force of elected officials in mid-November selected the proposal submitted by Macquarie Infrastructure Corporation over two competing proposals for a 40-year P3 lease of the airport. If the deal is ratified by the county legislature, the county would receive $595 million in lease payments during those years, and the company would invest $550 million in capital improvements to the airport. Neither the terminal nor the runways could be enlarged under the terms the county required be included.

DHS Inspector General Hits TSA Air Marshal Program. In mid-November, DHS I.G. John Roth told a congressional hearing that an unspecified portion of the Federal Air Marshal (FAM) program could be discontinued with no real loss of security. The I.G.’s assessment follows a recent GAO report that found TSA has no real way to assess the effectiveness of the FAM program.

San Diego Picks Aviation Facilities Co. for Cargo P3 Project. The San Diego Regional Airport Authority has selected Aviation Facilities Company (AFCO) as the best of the three finalists to design, build, finance, operate, and maintain the new Cargo Facilities project. It will include a 100,000 sq. ft. cargo processing and warehouse facility and associated infrastructure.

New Runway Capacity for London. The U.K. Department for Transport last fall announced that its consultation on airport-expansion policy would be open for submissions until December 19th, after which the Department will present its recommendations to Parliament for a vote sometime during the first half of the year. The expectation is that the plan will be for a third runway at Heathrow, which was the government’s choice in 2016. However, competing Gatwick Airport in November pointed to its having exceeded the 45 million passenger mark in 2017—which government studies had not expected to occur until 2030. Thus, Gatwick continues to argue for permission to add a second runway.

Will Atlanta Get a Second Airport? A defense bill passed by the House in November and expected to pass the Senate would re-designate Dobbins Air Reserve Base as a joint-use airport. This would allow non-military uses of the airport for the first time in decades. The new designation would clearly allow civilian cargo flights, but why not passenger flights as well? Passenger airline service is common at a number of other joint-use airports, including Albuquerque and Charlotte. Dobbins is located in Marietta, in suburban Cobb County, northwest of Atlanta.

Finally, a Rail Link to Newark Airport. After decades of talk by the Port Authority of New York and New Jersey, it now appears likely that the agency will proceed with a long-sought extension of its PATH commuter train line to Newark International Airport. The 2.4-mile extension is estimated to cost $1.7 billion and was recently included in the Port Authority’s $32 billion, 10-year capital plan, with a targeted completion date of 2026. The tentative plan calls for $1 billion of the cost to come from PA funds, and the other $700 million from grants of some sort.

Gary Airport to Build Customs Facility. Privately managed Gary Chicago International Airport has hired a construction management firm to manage the bidding process and construction of a Customs & Border Protection facility, to be built in an unused building adjacent to the airport fire/rescue station. The airport does have some international departures, but the return flights must land at another airport with customs facilities.

Another Major Expansion for Denver International. Hard on the heels of its $1.8 billion P3 project to expand the central terminal, DIA has announced plans to add 39 gates (a 50% expansion) spread across its three concourses, at an estimated cost of $1.5 billion. Strong growth in flights and the addition of new airlines are the factors leading to the gate expansion project. The project will have to win the approval of the Denver city council in order to go forward

Changes in P3 Concessionaires in Brazil. Several of the companies that hold portions of the concessions to major Brazilian airports are in financial trouble, so national airport regulator ANAC has encouraged buyouts of their shares by outside firms. In these original airport P3 concessions, government airport company Infraero holds 49% and investor-owned companies hold 51%. In the case of Sao Paulo’s Guarulhos International (Brazil’s busiest), Vinci Concessions is buying out troubled investors Invepar and OAS; joining Vinci is Mubadala Development Company from Abu Dabi. And for Rio de Janeiro Airport (Brazil’s second largest), China’s HNA Infrastructure and Singapore’s Changi Airport Group are replacing financially troubled Odebrecht in the P3 concession.

Pension Fund Sells Stakes in Two U.K. Airports. Ontario Teachers’ Pension Plan, a prominent global infrastructure investor, is selling part of its interest in Birmingham and Bristol Airports. Two Australian pension funds are the buyers—T Corp from New South Wales and Sunsuper Superannuation Fund. OTTP is selling 30% of its 100% holding in Bristol Airport and 14.4% of its shareholding in Birmingham (in which local governments and the Employees Share Trust retain 51.75%).

Japan Plans to Privatize Hiroshima Airport. The next step in Japan’s airport privatization program will be Hiroshima Airport, according to the Ministry of Land, Infrastructure, Transport, and Tourism. The plan is for a 30-year P3 concession, expected to start in 2021.This will follow the privatization that is already under way for Fukuoka Airport, for which three pre-qualified bids have already been received. Last year Japan privatized the airports of Kobe and Takamatsu, which brought the total to six—and counting.

Clarification re GAO Report on Airport Privatization. Last issue’s story on airport privatization referred to a 2015 GAO study on the subject (GAO-15-42) but mis-stated a key point. The GAO itself did not “recommend” that the airline veto power over privatization deals under the federal pilot program be reduced or eliminated. GAO’s report compiled and reported recommendations by various aviation stakeholders who made recommendations on how to make the pilot program more attractive. It was those stakeholders—not GAO—that made the recommendation. I’m happy to set the record straight on this.

“It is the same story on both the airline and aerospace sides: Players complain tactically when they feel disadvantaged, but there is no true multilateral discourse on the matter. Boeing is happy to accept tax breaks while asserting that a Canadian province cannot invest in a particular company. Delta takes issue with subsidies for Etihad Airways, but readily buys a stake in majority-government-owned China Eastern Airlines. The only difference between the two is that one is a competitor and the other is a strategic partner. Both are, by Delta’s own definition, highly subsidized.”
—Jens Flottau, “No Solution: Boeing-Bombardier Case Shows the Aerospace Industry Needs Common Standards on Government Support,” Aviation Week, October 2-15, 2017

“If congestion charges truly reflect the scarcity value of a runway at a crowded airport, fares could rise. Airlines’ share prices would certainly fall. The case for change is nonetheless clear. Frequent flyers are among the world’s richest people; the global airline industry has just had its three most profitable years ever; the market share of the big three airline alliances is rising. The aviation industry should pay for the infrastructure it uses; not make hay from it.”
—Editorial, “Winning the Slottery,” The Economist, November 18, 2017

“Our [book] has a full model of the [aviation] security system, mainly constructed by my co-author, a civil engineer and risk analyst at the University of Newcastle in Australia. It describes the effectiveness, risk reduction, and cost of each layer of security (including a few TSA doesn’t include), from policing and intelligence to checkpoint passenger screening to armed pilots on the flight deck. It is also fully transparent and can be varied and sized-up with just a hand calculator. Put into action, the model concludes that it is entirely possible to attain the same degree of safety at far lower cost by shifting expenditures from measures that provide little security at high cost to ones that provide more security at lower cost. One modest proposal, for example, would increase security while saving both taxpayers and the airlines hundreds of millions of dollars every year.”
—John Mueller, “Are We Safe Enough?” Cato at Liberty, October 25, 2017

“I have repeatedly said that the Federal Air Marshal (FAM) program, the way it has been run since the 9/11 terrorist attacks, is a waste of taxpayer monies. The FAM program should be drastically reduced to running [only] very special missions, and their primary thrust should be to run the Federal Flight Deck Officer (FFDO) program. Simply requiring a minimum of at least one FFDO on each US airliner under the Minimum Equipment List (MEL) program would dramatically improve the security of U.S. commercial aviation. FAMs would then run the FFDO program and any very special missions—and the cost of the resulting system would be less than a third of the current FAM program.”
—Billie H. Vincent, former Director, FAA Office of Civil Aviation Security, email to Robert Poole (Dec. 7, 2017), used by permission

Following the successful long-term P3 lease of the San Juan International, many observers expected a new wave of U.S. airport privatization—but that did not occur. Now, however, there are signs that the expected wave has begun. The little-used FAA Airport Privatization Pilot Program now has three active participants, as follows:

Airglades International Airport in Hendry County, Florida, announced the release (on October 17th) of an FAA Finding of No Significant Impact (FONSI) and a Record of Decision on this project to convert a general aviation airport into a cargo reliever for Miami International.

Westchester County, NY received three invited proposals in July for a 40-year lease of its airport in White Plains, New York.

St. Louis is moving forward with what amounts to an “asset recycling” approach, aiming to cash out Lambert Airport’s asset value and use the net proceeds for other infrastructure investments. In early October, Mayor Lyda Krewson urged the Airport Commission to proceed with detailed study of privatization’s potential, and the city has issued a Request for Proposals for a P3 advisory firm. A tentative schedule calls for submitting a final application to the FAA in May of next year.

Inspired by the example of St. Louis, Nashville Mayor Megan Barry has expressed interest in applying for a slot in the Pilot Program, with the idea of using net lease revenues to help fund a proposed $6 billion transit system.

Why would a local or state government want to privatize its airport(s)? After all, most U.S. airports are run relatively well, and they can finance capital improvements using tax-exempt revenue bonds. One reason, as in Nashville, St. Louis, and Westchester County, is to use the airport’s asset value to either invest in other infrastructure or to shore up ailing public employee pension systems. This general concept is known as “asset recycling.”

Another reason is to improve the overall quality of the airport. The 2017 Skytrax survey of airport quality worldwide gives one indication. Of the 100 top–rated airports in the world, only 14 are in the United States, and the highest-rated of these is Cincinnati, in 26th place, followed by Denver in 28th place. Out of those 100 top-rated airports, 37 are privatized. A second survey, carried out by Airports Council International, aims to identify “the world’s most customer-friendly airports.” It presents the results by airport size group, and for airports handling 5 million or more annual passengers, those finishing in first, second, or third place in any of the size categories include only two U.S. airports—Indianapolis and Jacksonville. Three of the top-scorers in other countries are privatized. Incidentally, among U.S. airports included in the latest J.D. Power & Associates customer-satisfaction ranking of 21 U.S. airports, Lambert St. Louis ranks 17th, suggesting considerable room for improvement. Mayor Krewson acknowledged this in a recent news article, saying that the airport “is not as good as we want it to be.”

If I were asked which U.S. airports would be the most likely candidates for improvement via privatization, I would single out two categories: (a) those operated as departments of city government and (b) those operated by multi-purpose port authorities. These are the airports whose management is likely to be the most micromanaged by elected officials (in the first category) or to be treated as cash cows by port authorities (second category). Here are some examples of politicization I’ve collected over the last several years.

In Atlanta, a relatively new and highly experienced airport manager was fired after failing to take “direction from senior officials of the City’s Procurement Department” regarding “the award of concession and construction contracts.”

A former manager of Denver International said “I spent about 10% of my time fighting off various internal and external meddlers or political gadflies and favor seekers,” and “For sure you will be gone when a new mayor is elected.”

In Los Angeles in 2014, the City Council overruled the Airport Commission’s decision to hire public relations firms not based within the city.

Miami International has had numerous conflicts over the award of concession contracts for shops and restaurants, with elected officials intervening in decisions made by airport management. And the Miami-Dade Ethics Commission has chastised the airport’s policy of providing VIP treatment for elected officials, including taking them to the head of long security screening lines.

Airports, like toll roads, are businesses that can and should be operated as businesses, not as tools of elected officials. Privatization, possible in the United States via long-term P3 lease agreements, would significantly de-politicize airports and give them an opportunity to be competitive with the world’s best airports.

The previous article discussed what investors would call the “sell” side of airport P3 transactions. What about the “buy” side? How interested are infrastructure investors in U.S. airports, and why aren’t more deals being done?

A recent article I&PE Real Estate (June 2017) was headlined: “Infrastructure Airports: Not Cleared for Landing.” The subhead captured its message, “Institutional investors would love to invest in U.S. airports, but, so far, it has proved close to impossible.” Author Christopher O’Dea interviewed a number of knowledgeable people to reach this conclusion. Susan Gray, head of S&P Global Ratings’ global infrastructure practice, agreed that private investors would love to invest in U.S. airports, “but the regulatory construct significantly limits their capacity to do that in a way that works for private investors.” Under U.S. law, you can’t take any revenue off the airport (hence, no return on investment), unless you get one of the handful of slots in the FAA’s Airport Privatization Pilot Program. But getting through the cumbersome FAA review and approval process can take years, and imposes a number of hurdles (such as a double super-majority airline approval requirement). As O’Dea comments, “The U.S. situation presents a stark contrast to the situation in most other developed countries, where private operation of airports is common,” and welcomed.

I’ve summed up this contrast by saying that while other countries offer airport investors a welcome mat, U.S. policy presents them with an obstacle course. If we want significant private investment to improve U.S. airports, the Pilot Program definitely needs modernizing. To begin with, it should be open to all U.S. airports, not just 10 of them.

One of the major hurdles to airport investment is the unequal tax treatment of airport bonds. Government airport operators can issue tax-exempt bonds, but that is not permitted for companies that enter into long-term P3 lease agreements. And this hits them both coming and going. When Aerostar Airport Holdings took over San Juan International in 2013, they had to pay off the airport’s existing (tax-exempt) bonds; to do this, they had to issue taxable bonds, at a higher rate of interest. Likewise, any large capital investment that they make in the airport has to be financed at taxable rates. This is a de-facto tax on private investment, basically saying it is not as good as public-sector investment. And this is not just my conclusion; an excellent report on airport privatization from the Congressional Research Service suggests five policy changes that could increase the attractiveness of U.S. airport privatization, and number one is “Offering the same tax treatment to private and public airport infrastructure bonds.” (Airport Privatization: Issues and Options for Congress, Congressional Research Service, 7-5700, August 16, 2017)

Another obvious change would be to reduce or eliminate the ability of airlines to veto a P3 lease agreement. The current law requires that the agreement must be approved by (1) 65% of all the airlines using the airport and (2) airlines representing 65% of the annual landed weight at the airport—a double super-majority requirement. No such obstacle exists in any other developed country. A 2015 report on airport privatization by the Government Accountability Office recommended that this veto power be reduced or eliminated (GAO-15-42). GAO also made a number of streamlining recommendations, such as making it automatic that previous federal grant funds to the airport do not have to be repaid in the event of privatization (which currently requires an FAA waiver).

There are two possible routes to modernize the Pilot Program. The most straightforward would be to add a provision to the FAA reauthorization bill that is still being debated in both houses of Congress. The current authorization was recently extended to March 31, 2018, meaning there are five months available for further debate and amendments. The other path forward would be to include such reform in the promised infrastructure bill being developed by the White House National Economic Council, for introduction after Congress completes its work on tax reform.

Many U.S. airports need both additional investment and better (de-politicized) management. And many city and county governments could benefit by getting out of the airport management business, liberating the capital value of their airport either for other infrastructure upgrades or to strengthen their under-funded pension plans. Many billions of dollars are sitting in pension funds and infrastructure investment funds, whose owners are seeking to invest some of that money in improving U.S. airports. Somewhere in there is the making of many win/win transactions.

Over the last several years, this newsletter has chronicled TSA’s efforts since 2013 to expand recruitment and vetting of potential members of the PreCheck trusted traveler program. Several different TSA procurement efforts were abandoned, initially due to objections by various privacy groups and later via litigation from TSA’s current monopoly contractor, Morpho Trust. But a recent bill approved by the Senate Commerce Committee (S 1872) would authorize TSA to try again.

Although PreCheck has more than 5 million members as of 2017, many times that number of people likely qualify. But because Morpho’s vetting method requires fingerprints that it submits to the FBI, applicants must appear in person, either at those airports where Morpho has set up a recruiting office, or at off-airport locations which in some cases are at seaports where the Department of Homeland Security sends people for other programs such as Global Entry fingerprinting and interviews.

By contrast, firms that were in competition for TSA’s previous third-party screening recruitment contracts proposed using big data algorithms to separate low-risk from high-risk people. In one procurement, would-be contractors actually used large sets of names provided by TSA, applied their algorithms, and sent the selected “eligible” names to TSA to check against its own databases and watch lists. Company sources at the time told me they were highly confident that their results would be judged acceptable by TSA. But the latest procurement effort (in 2016), was aborted after Morpho objected. First, it filed a bid protest claiming that the specific procurement method TSA used was not legal for that purpose. When that failed, Morpho filed suit, which eventually led to TSA dropping the procurement.

Today we have a new Administration, and with Morpho’s current sole-source contract set to expire in September 2018, TSA has announced plans to open to competition what it calls Universal Enrollment Services (including PreCheck). Specifically, TSA hopes to attract two or more contractors who can “provide innovative enrollment and identity solutions that deliver secure, streamlined, and effective enrollment services.” Politico quotes TSA’s Lisa Farbstein saying that they are looking toward “multiple private sector capabilities.”

With its monopoly at risk, Morpho is lobbying both House and Senate committees, arguing that fingerprints (or other biometrics) are the only sure way to vet candidates for PreCheck. But if algorithms using big data can vet people just as effectively—which is what appeared to be the case during previous third-party procurement efforts—there would be no need to require a biometric that can only be obtained in person. The Senate bill would provide legal authority for TSA to approve non-biometric methods as long as it can certify that they are equally effective.

If that turns out to be the case, it would allow people to apply online, and would permit contractors to market PreCheck to large companies, trade associations, etc., greatly expanding the potential membership in the program. That would be good news for airports and air travelers alike. Accordingly, among supporters of the Senate provision are Airport Council International-North America and travel groups including the Global Business Travel Association and the U.S. Travel Association.

As of now, the corresponding House bill (HR 2825) does not include a provision on expanding PreCheck recruitment and vetting—and Morpho is lobbying hard to keep it that way.

A new report from the Government Accountability Office asks some very pointed questions about TSA’s efforts to protect aviation from terrorist threats. In FY 2015, TSA spent $4.834 billion on passenger prescreening, checkpoint screening, checked baggage screening, canines, behavior detection, and Federal Air Marshals Service (FAMS). The specific questions Congress asked GAO to look into were (1) what information does TSA have on the effectiveness of these efforts, and (2) does TSA use such information to evaluate the cost-effectiveness of these programs. Based on the report, the answers appear to be (1) some, but not enough, and (2) very little. (Actions Needed to Systematically Evaluate Cost and Effectiveness Across Security Countermeasures, GAO-17-794, September 2017)

This report is an unclassified version of a classified report, so in a number of key places where you look for actual data, there is none, since TSA decided that the data are classified. But there are enough specifics to paint a disturbing picture. TSA has developed an analytical tool for analyzing trade-offs among its various programs, but it does not use it to systematically analyze cost and effectiveness trade-offs across all of its countermeasures. For example, it has apparently never compared the cost-effectiveness of armed pilots (Federal Flight Deck Officers) and Federal Air Marshals (FAMs). Overall, TSA does just the opposite: it portrays all of its measures as “layers of security,” ignoring the fact that some of those layers may not be worth what they cost. And as GAO notes in conclusion, “TSA does not have any efforts under way to systematically evaluate the potential cost and effectiveness tradeoffs across the full aviation security spectrum.’

Some of the most important details are contained in Appendix 1 (costs of the individual countermeasures) and Appendix 2 (effectiveness data). GAO reveals a number of problems with these data. For example:

TSA does not measure the extent to which its Secure Flight prescreening system misses passengers who are actual matches to various watch lists (false negatives).

TSA data on tests of screeners’ performance in identifying hazardous images on checkpoint X-ray screens are incomplete and unreliable between 2009 and 2015, so no accurate assessment of their competence is possible.

Covert tests of checkpoint screening performed by local TSA offices showed better performance than covert tests performed either by headquarters people or by outside contractors. And the results of the most recent covert tests are classified.

The same disparity in covert testing of checked baggage screening was found, and once again, the latest comparative results are classified.

Data on testing of canines were found by GAO to be not reliable.

More bad news on TSA screening is included in a new report from the DHS Inspector General’s office. It told Congress last month that its covert tests “identified vulnerabilities with TSA’s screener performance, screening equipment, and associated procedures”—but the specifics are all classified, and only a one-paragraph summary has been released.

This kind of poor performance (in contrast with TSA’s self-reported findings) is far different from what one would expect if TSA were solely the aviation security regulator, riding herd at arm’s length on separate entities carrying out screening operations (either airports or screening contractors). Repeated instances of self-tests yielding better results than testing by outsiders illustrate the conflict of interest that is built into the current TSA model.

Moreover, TSA has no measures of effectiveness for two of its countermeasures: Behavior Detection Officers and Federal Air Marshals. I wrote about BDOs last issue, so won’t go over that again. As for FAMs, TSA simply claims that this $800 million per year program deters terrorists, as indicated by the lack of aircraft hijackings since the program was launched. But that ignores the fact that two other countermeasures have the same purpose—and cost far less: the strengthened and locked cockpit doors and the armed pilots program (FFDOs). A study by security experts Mark Stewart (University of Newcastle) and John Mueller (Ohio State University) several years ago demonstrated the far greater cost-effectiveness of those alternatives to FAMs. But TSA has ignored that analysis.

Before leaving this subject, I want to quote a sentence from the study. “One of TSA’s top priorities is to deploy air marshals on flights that have a known or suspected terrorist on board.” Let me get this straight: we pay $4.8 billion a year and allow “known terrorists” to fly on U.S. airlines?

Over the last two decades, flight activity in much of the world has grown a lot faster than airport capacity. At many of the world’s largest hubs, the national government has imposed hourly limits on operations, defined as “slots.” This system works to the advantage of incumbent carriers, and is a barrier to entry to new (and generally lower-cost) carriers.

Every so often, calls arise for some kind of slot auction systems, in which a fraction of slots would (somehow) be taken away from those who hold them and either be administratively allocated to new entrants or auctioned off to the highest bidder. In August, Hawaiian Airlines CEO Mark Dunkerly proposed such an approach, during the CAPA Australia Pacific Aviation Summit. Business jet operators in Hong Kong are protesting the lack of slots at Hong Kong International, and calling for some kind of reallocation. And last year the Chinese government launched a pilot program under which 196 takeoff and landing slot pairs would be made available at Guangzhou Baiyun and Shanghai Pudong airports, with half of them—for domestic service—auctioned off and the other half—for international service—allocated administratively but subsequently able to be sold, rented, or traded.

Major airlines maintain the fiction that incumbent airlines “own” the slots they have historically used. The International Air Transport Association (IATA) urges airports to accept its “Worldwide Scheduling Guidelines,” under which this ownership would be formalized and any slots that became available (e.g., if an airline goes under or withdraws from serving an airport) would be auctioned off. This system is clearly anti-competition, making it very difficult for new entrants to provide service at very popular airports.

The market-based alternative is variable runway pricing, adjusted prior to each scheduling season, under which prices would be charged to take off as well as land, and the price for each 10 or 15-minute time block would be high enough to balance demand and capacity. This approach was simulated with actual airline and airport staff taking part in a “strategic game” funded by FAA and carried out at George Mason University in 2004. As applied to LaGuardia Airport, the exercise found that in response to pricing, airlines up-gauged to larger aircraft and total daily passenger throughput increased significantly. (See: http://reason.org/policy-brief/evidence-that-airport-pricing/)

In terms of political feasibility, there are many advantages of runway pricing over slot auctions, as I pointed out in the December 2007 issue of this newsletter. They include:

Runway pricing would produce immediate congestion relief and better service, whereas all slot auction proposals would be gradually phased in over a decade or two.

Pricing would be far more effective in opening up room for lower-cost new entrants, hence fostering airline competition.

Any auction system would have to be imposed by the federal government, and Congress would insist on all sorts of carve-outs for special interests. By contrast, pricing is an airport decision, independent of Congress.

Under U.S. bilateral agreements, foreign carriers are exempt from slot allocations, but all carriers must pay airport runway charges, as long as they don’t discriminate between foreign and domestic airlines.

Business jets and charter flights, being non-scheduled, are a poor fit for slot systems, but would gain access under runway pricing.

Alas, although the U.S. DOT changed its airport rates and charges policy to allow market-based (non-weight-based) runway pricing in 2008, no U.S. airport has taken advantage of this alternative. The only two airports I know of that have switched from weight-based charges to a modified time-of-day price structure are privatized Gatwick and Heathrow in London. But pricing remains a good idea, as we will see when a congested U.S. airport finally bites the bullet and implements it.

New Report Covers Airport Privatization and Public-Private Partnerships. Reason Foundation has just released the Air Transportation chapter of its Annual Privatization Report 2017, an annual volume covering P3s and privatization across numerous economic sectors. The author of this chapter is the editor of this newsletter. Go to: /wp-content/uploads/2017/11/annual_privatization_report_2017_air_transportation.pdf.

Edgemoor/Meridiam Team Wins $1 Billion K.C. Airport Terminal Project. The Kansas City Council’s selection committee picked the design/build/finance proposal of Edgemoor Infrastructure and Meridiam Infrastructure for the project to replace the aging multi-facility terminal at Kansas City International with a state-of-the-art single terminal. Three other pre-qualified teams had submitted proposals. Final details of the financing remain to be negotiated. In addition, replacing the multi-terminal status quo with a single terminal must pass muster with voters at a November 7th election in order for the project to proceed.

Ownership Changes at Italian Airports. The largely privatized airports in Italy underwent several changes in ownership during September and October. First, two infrastructure funds—Deutsche AM and Infravia—acquired a controlling interest (60.7%) in SAVE, which owns four Italian airports (including Venice) and one in Belgium. In October, toll roads company Atlantia began selling its 22.1% interest in SAVE, and a few weeks later purchased an additional 1.3% stake in Aeroporti di Roma, bringing its ownership share to over 99%, with the city government of Rome owning 0.25%.

Santa Monica Runway Destruction Continues. The City of Santa Monica continues with phase 1 of its two-phase plan to shut down the Santa Monica Municipal Airport. The first phase, which involves reducing the runway length to 3,500 ft. (from the present 4,973 ft.) had been halted by a temporary restraining order on behalf of a lawsuit filed by several airport tenants. That order was lifted on Oct. 17th, with the judge finding that the city had acted in accordance with law and an agreement it had reached last year with the FAA. The shorter runway will eliminate use of the airport by business jets, while phase 2, several years later, will eliminate the runway altogether, forcing closure and redevelopment of the airport.

Decreasing Airfares Verified by Additional Study. The Eno Center for Transportation last month released a policy brief which summarizes data showing that airline ticket prices continue their long decline that began after the Airline Deregulation Act of 1978, with inflation-adjusted average fares 40% less today than in 1979. Critics pointed out that the report does not include ancillary fees which many passengers pay (e.g., for checked baggage), in addition to the ticket price itself.

Bill Calls for Stronger Aircraft Ownership Disclosure. Partly in response to a report by the DOT Inspector General critical of the way FAA allows private planes to be registered, and a recent Boston Globe investigative report on illicit activity linked to planes registered to foreign trusts, Rep. Stephen Lynch (D, MA) has introduced the Aircraft Ownership Transparency Act of 2017 (HR 3544). The bill would require the “beneficial owner” of an aircraft to be identified as a condition for getting U.S. registration.

PreCheck Added at Airport with Fewer than Three Flights per Day. For reasons known only to itself, TSA has begun offering PreCheck expedited passenger screening at MidAmerica Airport, near Belleville, IL, across the river from St. Louis. The airport’s only scheduled passenger service is provided by Allegiant, which offers a total of 20 flights per week to eight destinations—an average of 2.86 flights per day. I wonder what the TSOs assigned to MidAmerica are going to do with the rest of their time on duty.

Eight Teams Attend Bidders’ Conference for Kingston, Jamaica Airport. A long-term public-private partnership (P3) lease for the aging airport serving Kingston, the capital of Jamaica, drew eight teams to a Bidders’ Conference on Sept. 26th. The chairman of the Development Bank of Jamaica, Paul Scott, told attendees that “This is a great opportunity. If I knew before what I know today, I would be in the audience with you as a potential bidder.” The event included a tour of the airport, Norman Manley International.

CT Checkpoint Scanners Are In Testing on Three Continents. The need for more-accurate screening of carry-on bags is driving security agencies and airports toward replacing two-dimensional X-ray screening at checkpoints with 3-D computed tomography (CT) scanning comparable to what is standard for checked baggage. In current testing—at Tokyo Narita, Amsterdam Schiphol, and several U.S. airports served by American Airlines—are ConneCT machines developed by Analogic. The company says these scanners can screen 400 to 500 bags per hour, compared with TSA’s average of 180-240 bags/hour with current X-ray scanners. Several other companies are also developing such scanners, as detailed by Helan Massy-Berresford in Aviation Week, Sept. 4-17, 2017.

Macquarie Selling Stake in Copenhagen Airports. Global infrastructure investor Macquarie in September announced that it is selling its 27.7% stake in Copenhagen Airports, which owns Copenhagen International and several smaller airports. The other large shareholder is Ontario Teachers’ Pension Plan (30%). Macquarie’s stake is being acquired by Danish pension fund ATP, at an estimated cost of $1.57 billion. The Danish government retains ownership of 39.2% of Copenhagen Airports.

Pittsburgh Plans $1.1 Billion Terminal Makeover. On September 13th, the Allegheny County Airport Authority board voted unanimously to proceed with a major reconstruction of its terminal facilities. The current terminal, designed for a major U.S. Airways hub that no longer exists, uses only 39 of the current 75 gates. The revamp will downsize the airside terminal to 51 gates and build a new land-side terminal adjacent to it, eliminating a tram between the current land-side and airside terminals. The new land-side terminal will include expanded security screening and a new baggage system. The Airport Authority hopes to interest developers in land freed up by replacement of the current land-side facility.

Bulgaria Tries Again to Privatize Sofia Airport. The Bulgarian government, whose previous proposal for a concession to modernize the Sofia Airport was judged financially unattractive to potential bidders, has contracted with the International Finance Corporation (IFC) to advise it on the process and potential deal structure. IFC has noted that its scope might extend to one or more other airports, in addition to Sofia.

Saudi Arabia to Privatize 27 Airports. The civil aviation authority of Saudi Arabia has announced a contract with KPMG to advise it on the sale of a minority stake in Riyadh Airport, the country’s second-largest airport. Goldman Sachs was selected in June as financial manager for the transaction, which is intended to be the next in a program that will encompass all 27 Saudi airports. Earlier in 2017, the government awarded P3 concessions for Taf, Hail, and Abdulaziz Airports; Munich Airport and TAV Airports Holding won the initial concessions.

TRB Releases Report on Social Media and Airport Emergencies. The Transportation Research Board’s Airport Cooperative Research Program has released a 100-page report, “Uses of Social Media to Inform Operational Response and Recovery During an Airport Emergency.” It includes six case studies—but none of these cases includes the panic and chaos spread by social media in recent incidents at JFK, LAX, and FLL. Still, the report may assist airports in developing social media emergency management plans. The report is available at http://nap.edu/24871.

“The mayor’s office heard a presentation from experts on the concept of a public-private partnership to operate airports in a way that would generate revenue for public services. We are monitoring the process in St. Louis to determine whether it is feasible for a city the size of Nashville. If Metro could generate hundreds of millions of dollars to pay for needs such as transit, while maintaining a high-quality airport that meets the needs of our growing city, we have a responsibility to the taxpayers of Davidson County to do our due diligence and explore the possibility.”
—Sean Braisted (spokesman for Mayor Megan Barry), Joey Garrison and Nate Rau, “Mayor Barry Looks at Privatizing Nashville Airport to Generate Transit Funds,” The Tennessean, June 26, 2017

“[At Atlanta’s Hartsfield-Jackson], you have the mayor who makes the decisions. So you know, it all depends on the relationship between that one person and [the airport general manager]. The big issue, of course, is contracts. . . . Money and politics have a very strong relationship. . . . The airport could be successful from a financial point of view, from a customer service point of view, from a safety and security point of view, from its economic benefits to the community, and there still may be turnover [in management] because you have these other issues in play.”
—Angela Gittens, “Ex-Atlanta Airport Chief: ‘All Kinds of Issues’ Make Job Tough,'” Kelly Yamanouchi, Atlanta Journal-Constitution, May 31, 2016

“The market opportunity here is tremendous, but people have said the market opportunity is tremendous for a long period of time. So it’s really about when that can become a reality. It’s something that is moving along now, and we want to be a bigger participant in it. What’s less attractive is investing in only one part of the airport, because you don’t have the ability to master plan. The ability to master plan an entire airport and look at its needs over a very long term, not simply through the length of a political cycle, allows you to provide a much better facility.”
—Julio Garcia, IFM Investors, Jordan Stutts, “I Think It’s Important Infra Doesn’t Become Overly Politicized,” Infrastructure Investor, Sept. 27, 2017

“IATA doubled down on its quirky definition of ‘smarter’ regulation by asking not only for a free ride from the suppliers, but an inside track against competitors. It is not called a legacy industry for nothing. That every year IATA again has to plead that the IATA Worldwide Slot Guidelines be adopted should tell you all you need to know about the falsity of its title. Perhaps the fact that it is a naked attempt to distort the market, whilst allowing incumbents to benefit from windfall gains, is so blindingly obvious that even protectionist-minded governments can see through it. There have even been calls to break up slot monopolies at airports (a la BAA and AT&T) in such irresponsible, anti-business rags as the Financial Times. Could the tide be turning?”
—Andrew Charlton, “The IATA AGM—Zigging Not Zagging; Canning Not Cunning,” Aviation Intelligence Reporter, July 2017

Many airport directors at smaller airports have expressed concern about or opposition to the large section in the House FAA reauthorization bill that would convert the agency’s Air Traffic Organization (ATO) into a separate nonprofit corporation, funded by fees charged to airlines for ATC services and governed by a board nominated by key aviation stakeholders. Some airport directors, joined by small-city mayors and rural-state legislators, have written to members of the House and Senate opposing this proposed change, implying that the status quo is better for small airports than what the House bill calls for.

These concerns are based on at least five propositions, as articulated by the Alliance for Aviation Across America (AAAA):

The change means privatization of the ATC system.

The governing board would be dominated by the big airlines.

The corporation would be profit-and-loss oriented, like a for-profit company, and might therefore close down or not approve new contract towers.

ATC user fees are equivalent to taxation, and would apply to private planes and business jets, raising their cost of flying and hence the extent of their flying.

The airspace itself would be turned over to the corporation, which would make decisions that best serve the major airlines.

If those propositions were true, I would oppose the House bill, rather than supporting it. But in fact, every one of those propositions is false, as you can easily see by reading the actual text of HR.2997, the AIRR Act, which is significantly improved from last year’s version. Title II of the bill defines in detail the American Air Navigation Services Corporation. Going directly to the five points above, a fair reading of Title II makes clear the following:

First, what is proposed is not “privatization,” which in U.S. parlance means either contracting out a government service to a for-profit company (as FAA did last decade via a contract with Lockheed Martin to modernize and operate Flight Service Stations) or selling a state-owned enterprise to private investors. Instead, the bill calls for reorganizing the existing ATO by moving it out of FAA and incorporating it as a nonprofit company, removing its funding from aviation taxes appropriated each year by Congress and authorizing it instead to charge ATC fees (as all other ATC providers do worldwide), and changing its governance to a corporate board of directors nominated by all the principal aviation stakeholders, including airports and general aviation. Regulation of the ATO would remain with FAA and DOT.

Second, of 13 board members, only one would be nominated by the major airlines’ trade group A4A—a big change from last year. Another would be nominated by the Regional Airline Association (whose members provide nearly all the airline service at smaller airports) and a third by the Cargo Airline Association. Two seats would be nominated by unions—one by the controllers’ union and the other by pilots’ unions. General and business aviation would nominate two seats, and airports would nominate one. The federal government would also nominate two board members. Thus, the “big airlines” would have just one out of 13 stakeholder board members. How could this possibly be “dominance”?

Third, as a nonprofit corporation governed by a cross-section of the aviation industry, the revamped ATO must take into account all aspects of aviation. But the House bill does not leave this to chance. Chapter 907 of the bill spells out that no user can be denied access to airspace, that access to public-use airspace not be reduced, and that the contract tower program be maintained—and all of these provisions are to be enforced by the Secretary of Transportation.

Fourth, due to concerns about user fees expressed by business and general aviation, the bill prohibits by law the imposition of any ATC user fees on any category of business aviation or general aviation. The company’s board could not change this. The only way it could be changed is if Congress were to someday change the law—which is highly unlikely as long as there are robust GA Caucuses in both the House and Senate.

Finally, the bill makes clear that only the operation of the ATC system—not ownership of the airspace—would change if the bill becomes law. The airspace would remain public, shared by civil and military aviation, as it is in the more than 60 other countries with self-funded ATC corporations.

In short, AAAA has been propagating a false and misleading description of ATC reform, presenting this as far worse than the status quo for smaller airports and their communities. That’s unfortunate, since I believe the status quo is worse for smaller airports than the likely future with a nonprofit ATC corporation along the lines in the AIRR Act.

As I wrote in the July issue of this newsletter, the FAA has imposed a moratorium on contract tower approvals since the 2013 federal budget sequester. Given the pressure on FAA to prioritize its limited budget to advance a handful of NextGen programs, there is no relief in sight for lifting this moratorium, despite a growing list of qualified applicants for contract towers.

Moreover, the best hope for more airports to get contract towers is an increase in the benefit/cost ratio, so that more airports could qualify. An innovation that increases the benefits (by improving surveillance at night and in bad weather) and reduces both operating and construction costs is Remote Towers. Yet FAA has no funding program to advance Remote Towers. By contrast, the self-funded ATC corporations in Europe have remote towers in service in Scandinavia and within a year or two of certification in a number of other countries, including Germany, Hungary, and Ireland. ATC corporations can issue revenue bonds (as airport do) to finance modernization programs, which FAA cannot do.

One more point: Under the AIRR Act, airport grants under AIP would be funded by a dedicated excise tax, protected from cutbacks like those that occurred during the 2013 budget sequestration.

ATC reform will be a major issue in Congress this fall. Aviation supporters in small cities and rural states should look more carefully at this important subject, and separate propaganda from reality.

Over the years, outside researchers, such as the National Academy of Sciences (2008) have criticized TSA’s large program of Behavior Detection Officers (BDOs) trained to spot suspicious behaviors of air travelers in airport terminals. The general thrust of the critiques was that there was no serious research demonstrating that minimally trained officers using a memorized list of 96 suspicious factors could add significant value by detecting threats to aviation. TSA’s only reported evidence was data on referrals by BDOs to law enforcement. But the Government Accountability Office and others pointed out that essentially none of those referrals were for threats to aviation security: they were mostly things like being in the country illegally or being in possession of illegal drugs.

Public criticism and pressure from some members of Congress, especially Rep. Bennie Thompson (D, MS), the Ranking Member of the House Homeland Security Committee, eventually led to some changes. Between 2013 and 2016 TSA downsized the program from 3,131 BDOs to 2,393. And in April of this year, TSA reported that all BDOs had been re-designated as Transportation Security Officers and assigned to doing their behavior-spotting at checkpoints, rather than wandering around terminals. The agency also reduced the list of memorized behaviors from 94 to 36.

But when TSA recently claimed that it had identified 178 sources that showed behavior detection works, Rep. Thompson asked GAO to evaluate those sources and “assess the extent to which TSA has valid evidence demonstrating that the specific indicators in its revised list can be used to identify passengers who pose a threat to aviation security.”

The new report, GAO-17-608R, is titled “TSA Does Not Have Valid Evidence Supporting Most of the Revised Behavioral Indicators Used in its Behavior Detection Activities.” I could stop there, but you should see what a flimsy basis TSA used to justify this ongoing program.

First, here is a breakdown of the sources TSA provided. Of the 178 documents: 137 are news or opinion pieces, not studies; 21 are reviews of studies, which themselves cannot be verified. That left only 20 that are original research, which GAO had two social scientists evaluate for (1) reliability and validity of data and methods, and (2) the applicability of the research to the behavior indicators TSA now uses, which it claims the studies support.

The 20 studies themselves did not support 28 of the 36 currently used behavioral indicators. There was one source (out of the 20 studies) for each of 7 indicators, and two sources of evidence to support 1 indicator. Thus, there was a bit of support for 8 of the 36 indicators, and based only on some of the 20 actual studies, out of the 178 sources TSA cited.

How did TSA respond to the GAO report? Via its usual defenses: behavior detection is “just one layer of security” and besides, some of the BDO referrals to law enforcement lead to arrests (but not for being threats to aviation security). For this, general taxpayers and air travelers remain on the hook for $186 million per year.

After all this, you might expect GAO to recommend that the BDO program be terminated—and if checkpoints are still short of screeners (as they were last year), at least some of the 2,393 current BDOs could be re-assigned to screening duty. But GAO this time made no recommendations, merely reminding Rep. Thompson that “TSA should continue to limit funding for the agency’s behavior detection activities until TSA can provide valid evidence that demonstrates that behavioral indicators can be used to identify passengers who may pose a threat to aviation security.” This is very disappointing.

As major airlines consolidated over the past decade or more, adverse consequences have hit many airports. Consolidation meant fewer large hubs were needed by the now-larger American, Delta, and United, so former hubs like Pittsburgh and Cincinnati shrank dramatically, while the remaining large hubs grew by 10% from 2007 through 2017. But airline service declined over that same period by 6% at medium hubs, 12% at small hubs, and 15% at non-hubs. How are airports in the latter three groups coping?

Cincinnati and Pittsburgh have moved aggressively to remake themselves. Delta’s major cuts in 2010 at Cincinnati/Northern Kentucky Airport yielded two nearly-empty terminals and high landing fees that deterred new entry. So airport management tore down those two terminals and used some of the savings to improve services in the remaining one. They also invited more air cargo operators to invest in facilities on or adjacent to airport property, and reduced landing fees to attract low-cost carriers (LCCs). The results, per a July 26thWall Street Journal article, include new airline service from Allegiant, Frontier, and Southwest, growth in non-airline revenue from 49% of the airport’s total in 2013 to 62% so far this year. And cargo operations now account for 56% of landed weight, thanks to expanded operations by DHL and Amazon.

Pittsburgh, whose U.S. Airways hub was eliminated in 2004, is following a similar recovery path. More than 25 of the airport’s 75 gates are unused, and the airport authority is debating facility downsizing options—including the possibility of closing its huge landside building or eliminating one of the two buildings comprising the midfield terminal. Meanwhile, reduced landing fees and aggressive marketing efforts have led to new airline service from major carriers and LCCs alike. Southwest now has a large presence at PIT, and more recently Allegiant, Frontier, JetBlue, and Spirit have launched service there, along with European LCCs Condor and Wow Air. PIT’s June 2017 passenger volume was nearly 833,000—the highest in a decade.

Similar reinvention efforts are under way at former major hubs in Cleveland, Memphis, and St. Louis, each depending considerably on new service from LCCs.

LCCs have also played a large role in Baltimore-Washington International Airport (BWI) surpassing Washington Reagan and Washington Dulles Airports in passenger volume this year. Southwest was the initial key to BWI’s growth, lured by low landing fees and later by improvements to the terminal. More recent entrants include Allegiant, JetBlue, and Spirit, along with overseas carriers British Airways, Norwegian, and Wow Air.

New entry by lower-cost carriers also offers new hope for secondary airports in major markets, such as Long Beach, Phoenix-Mesa Gateway, and Stewart, north of New York City. Long Beach last year was able to increase the number of daily flights permitted under its noise ordinance to 50 from the former limit of 41. Southwest took advantage, competing with LGB’s primary carrier, JetBlue. The result was that in first-half 2017, passenger volume was up by 47% compared with 2016.

Phoenix-Mesa Gateway has struggled to establish itself as an alternative to Phoenix Sky Harbor (an American hub). Gateway’s largest air carrier is Allegiant, which recently announced new routes to Indianapolis and St. Louis. But with Allegiant focused primarily on leisure travel, Gateway is seeking a business-focused carrier such as United Express that would link to one or more major hubs such as Denver and Chicago.

Several secondary airports in the Northeast are hoping that this year’s entry by long-haul LCC Norwegian Air will reposition them as better alternatives to major hubs. The airline this summer began offering service to an array of European cities from Hartford, Providence, and Stewart (in Newburgh, NY). Destinations include Belfast, Bergen, Cork, Dublin, Edinburgh, and Shannon—most are offered between two and five times per week. The average cost per passenger at the three secondary airports is significantly lower than at Boston Logan and New York JFK.

The good news for U.S. airports is that the U.S. market is still one of largely open entry—and that offers a way forward for airports (and their passengers) that have lost service due to mergers among major airlines.

Back in March, the White House budget outline for the Department of Homeland Security announced the goal of ensuring that “the cost of government [aviation security] services is not subsidized by taxpayers who do not directly benefit from those programs.” In principle, I agree with that point (though others argue that aviation security should be viewed as the same kind of public good as national defense, and paid for by all taxpayers). But the means chosen in the budget outline was an increase in the Passenger Security Fee (which is added onto each airline ticket).

Airlines rightly objected to this, on the grounds that when Congress last increased that fee in 2014 (from $2.50 per enplanement and maximum of $5 per one-way trip) to $5.60 per one-way trip, it diverted $1.3 billion per year of the revenue to federal deficit reduction. So that part of this “user tax” became a general tax, pure and simple. And that is inconsistent with the Administration’s goal. On the principle of first do no harm, the most pressing reform is to end that transfer to the general fund and dedicate that $1.3 billion toward TSA’s screening operations that are intended to benefit air travelers.

This concern has resonated with a number of House members knowledgeable about aviation and security. In May, Reps. Peter DeFazio (D, OR), Bennie Thompson (D, MS), and Bonnie Watson Coleman (D, NJ) introduced HR. 2514 that would require all proceeds from the existing Passenger Security Fee to be devoted to TSA. More recently, in mid-July the House Appropriations Committee 2018 spending measure for the Department of Homeland Security rejected the Administration’s proposed increase in the Security Fee, but failed to mandate that the $1.3 billion be redirected to TSA rather than deficit reduction.

In the United States, ever since the Reagan Administration, small airports have had the option of obtaining a lower-cost control tower via the FAA’s Federal Contract Tower program. But the airports don’t get to choose their contract operator; it is chosen for them by FAA.

The situation in Europe is different. As I’ve written previously, control towers in the U.K. have long been “contestable.” That means the airport is the decision-making entity: it can either provide tower services itself (meeting national government standards) or contract with any certified control tower provider. In recent years, that model has spread to at least four other European countries.

The most recent report on this phenomenon comes from a research consortium called Compair (which stands for competition in air traffic management), funded by the E.U.’s SESAR program. A Compair workshop in Madrid earlier this year (reported on by Aviation Advocacy’s blog) offered a current status report on control tower competition and some findings on the benefits.

As of the first of this year, Compair reported the following:

Sweden

17 towers contracted to new operators

Germany

14 towers contracted to new operators

Spain

12 towers contracted to new operators

U.K.

11 towers, with 3 to newcomers and 8 renegotiated with incumbent

Norway

1 tower about to be contracted to newcomer

The main research findings on tower competition, as summarized by Aviation Advocacy, are as follows:

Competition led to reduced tower costs of up to 50%.

Competition encourages use of new technology to improve service or reduce costs.

Privatized airports are the main drivers of tower competition.

Competition can lead to lower-cost renewal of incumbent tower services.

An effective competitive process requires that all competitors have access to all relevant information.

One other useful finding was that how tower services are paid for makes a big difference. If the country’s ATC provider charges the airport directly for tower services, then the airport has a strong incentive to seek competitive bids. But if the charges for the tower are embedded in the ATC fees charged to airlines, they will have less of an incentive to seek competition for any particular tower, especially in Europe where most airlines operate in many different countries, dealing with many ATC providers.

Members of Congress and various consumer groups have complained that the mergers which led to only four “major” airlines—American, Delta, Southwest, and United—have produced a kind of shared monopoly of airline service. If that is true, the results should be visible in higher air fares and reduced competition. But recent research findings call into question whether this is really happening.

First across my desk was a June 2017 study by economists Daniel Kasper and Darin Lee, of CompassLexecon, an economics consulting firm. Though it was commissioned by trade group Airlines for America (A4A), the study is based on data from U.S. DOT. Here are some of its principal findings:

The average number of competitors on U.S. domestic city-pairs has continued increasing, growing from 3.3 in 2000 to 3.5 in 2016.

Inflation-adjusted ticket prices are at or near historical lows, over the period 1990 through 2016.

Smaller airlines have been growing much faster than the four major airlines, as measured by available seat-miles. From 2011 through 2017, ASM growth was 3% for American/Delta/United, 21% for Southwest, 53% for JetBlue, 65% for Alaska/Virgin, and 111% for ultra-LCCs (Allegiant, Frontier, and Spirit).

Domestic origin & destination (O&D) passengers have more options to choose a carrier other than American/Delta/United; other choices were available to 65% of passengers in 2000 and to 88% of them in 2016.

The four largest airlines (including Southwest) are competing vigorously at each others’ hubs or focus cities.

I was surprised by many of these findings, but they appear to be solidly based on U.S. DOT data.

Another report crossed my desk in August. A new study from the Darden School of Business at the University of Virginia found that despite Southwest becoming a “major” carrier, the “Southwest Effect”—its lower fares leading to lower average fares in new markets it enters—is still a viable force. UVA’s Alan R. Beckenstein and aviation consultant Brian M. Campbell researched 109 daily nonstop markets that Southwest entered between 2012 and 2015 (years largely after the consolidation that produced today’s huge American, Delta, and United). They found that the weighted average fare reduction in these markets after Southwest entered was 15%, and the average traffic increase was 28%. The authors note that many of these markets had been served previously by Southwest’s one-stop service, which had already brought down average fares between those city-pairs. The fact that Southwest going to nonstop service brought further market fare reductions and increases in passenger volume is a dramatic demonstration that the Southwest effect remains potent.

Kansas City Gets Four Bids for New $1 Billion Terminal. Four companies submitted qualifications to design, build, and finance a new single terminal to replace the current multiple terminals at Kansas City International Airport. And all four submitted proposals by the August 10th due date. Assuming the selection committee selects a winner, and that the City Council approves the deal, the last hurdle will be a citywide vote on November 7th. Many locals favor retaining the existing multi-terminal design, in which they can park close to the terminal they will use.

Westchester, NY Gets Three Privatization Proposals. Three consortia in August submitted proposals for a long-term lease of Westchester County Airport under the federal Airport Privatization Pilot Program. They are led by (1) Ferrovial and Star America, (2) Macquarie Airports, and (3) Oaktree Capital Management and Connor Capital. After the county’s Airport Task Force recommends a winner, the deal will go to the county Board of Legislators, where approval requires 12 of the 17 members.

United Plans Service at Paine Field. Following up on a previous announcement by Alaska Airlines, United Airlines in mid-August announced that it, too, will serve Paine Field in the northern suburbs of Seattle, once the new privately financed terminal by Propeller Airports opens in 2018. United plans to serve Denver and San Francisco, important United hubs. A last lawsuit against commercial service at Paine Field was dismissed by the Washington Supreme Court in mid-July.

$1.8 Billion Denver Terminal P3 Approved. In mid-August, the Denver City Council voted 10-2 to approve a 34-year public-private partnership to revamp and operate the central terminal at Denver International Airport. The lead private partner for the deal is Ferrovial Airports, a major shareholder in privatized London Heathrow Airport. The project will relocate TSA security functions and greatly expand space devoted to revenue-producing shops and restaurants.

PFC Increase Making Progress in U.S. Senate. Two recent votes in the Senate would increase the federal cap on local airport passenger facility charges (PFCs) to $8.50 at the originating airport, from the current $4.50, unchanged since 2000. The increase was first included in the Senate Commerce Committee’s FAA reauthorization bill, which has not yet reached the Senate floor. Subsequently, the Senate Appropriations Committee included the PFC increase in its FY 2018 transportation and housing appropriations bill.

Airport Privatization Continues in Japan. Vinci Airports, teamed with Orix Corporation and Kansai Airports, was awarded a 42-year concession for Kobe Airport in July. The first two companies in 2016 won a 44-year concession for Kansai and Osaka International Airports; henceforth, all three of these airports will be operated and managed as a unit. In August, the Ministry of Land, Infrastructure, Transport, and Tourism announced plans to privatize seven airports in Hokkaido, in northern Japan.

Gatwick Airport Argues for a Second Runway. After years of study, last year the U.K. government decided that “the” runway addition to serve Southeastern England would be at London Heathrow, not at Gatwick. That process is moving forward, but London Gatwick has not given up. Now that it has handled a record 45 million passengers in the 12 months ending June 30th, it has renewed its call for permission to finance and build a second runway. CEO Stewart Wingate points out that Gatwick is the only one of the top 20 airports by passenger growth with a single runway. “We continue to offer the U.K. a financeable and deliverable second runway scheme which we stand ready to deliver, should the Government give us the go-ahead,” he said.

Sydney Airport Seeks More LCC Service. Unlike many major hub airports, which seem dominated by a single major airline, privatized Sydney International sees a bright future in serving long-haul low-cost carriers. It is already served by four LCCs: AirAsia X, Cebu Pacific, Jetstar, and Scoot. Aviation Daily (Aug. 21, 2017) reported that Sydney is actively seeking additional long-haul LCC service. The airport hosts 44 airlines, with service to 94 international destinations.

TSA PreCheck Tops 5 Million Members. The Transportation Security Administration announced in July that more than 5 million air travelers have enrolled in the PreCheck program since its first application center opened in December 2013. There are now over 390 such centers, though only 44 are at airport locations.

Port Authority Begins $10 Billion JFK Redevelopment. On July 25th, the Port Authority of New York and New Jersey released a request for proposals for preliminary engineering and design services on the planned $10 billion revamp of Kennedy International Airport. The program will include redeveloping or replacing older terminals, improving connections among the terminals, and upgrading the AirTrain transit system. The majority of the projects are expected to be privately financed, similar to the terminal replacement project under way at La Guardia Airport. New York State has separately committed $1.5 billion to increase capacity on the heavily congested Van Wyck Expressway serving JFK.

LAX Issues RFP for P3 People Mover Project. In the first of several major projects that comprise its Landside Access Modernization Program (LAMP), Los Angeles World Airports on August 1st released its RFP for the Automated People Mover to the three-prequalified teams seeking to design, build, finance, operate, and maintain the system. Technical proposals are due in November and financial proposals in December.

Bechtel Wins Contract for London City Airport Expansion. Investor-owned London City Airport last month selected Bechtel Corporation for its $477 million expansion project. The project includes adding a full-length taxiway alongside the single runway, adding seven new aircraft parking stands, and expanding facilities in the terminal. The expansion will allow for 6.5 million annual passengers and 111,000 flight movements per year.

New Report on Ft. Lauderdale Airport Shooting: Even Worse. The county government’s own review of the January shooting that was followed by mass panic and the complete evacuation and shut-down of the airport, reveals that response to the situation was even worse than depicted in a previous report from the County Sheriff’s Office. The 82-page consultant’s report, released in August, cites a complete lack of coordination between airport and law enforcement officials that failed to prevent or to cope with the panic spread by people using social media to spread false claims of additional shooting in all four terminals.

Atlantia Buys Stake on Bologna Airport. Italy’s largest toll road company, Atlantia, which also owns the largest share of Rome’s airports, has acquired 29% of the Bologna Airport for $194 million. Atlantia is now Bologna’s second-largest shareholder, after the Bologna Chamber of Commerce, which owns 37.5%.

“Critics assert that public-private partnerships enrich investors at taxpayers’ expense, are more expensive and less accountable, lead to public bailouts, and do little to help rural areas. But this ignores strong evidence to the contrary in states like Pennsylvania, New York, Florida, Colorado, North Dakota, and California. . . . LaGuardia Airport, often mocked for its antiquated facilities, is today completely overhauling its central terminal, thanks to a public-private partnership Almost 80 percent of the $8 billion design and construction costs will be paid for by private financing and existing passenger fees. The risk of cost overruns or construction delays is transferred from the Port Authority to a private consortium.”
—Mary E. Peters and Samara Barend, New York Times, July 17, 2017

“It’s no surprise that ACI-North America hopes to sever its reliance on the government. ‘We must act immediately to get Washington out of the way and eliminate the outdated federal restrictions that hold America’s airports back,’ wrote ACI-NA President Kevin Burke in their report. ‘By giving airports the ability to meet their local infrastructure needs without relying on federal tax dollars, airports will be well-positioned to maintain their leadership in the global aviation system.’ Quite. The global aviation system of the 1960s, he means. From no-user-fee Air Traffic Management, hopefully ‘revolutionized’ by bringing it into the 1980s, to command-and-control management of state-owned airports, the U.S. is no shining light on the hill. Unless that hill is in, say, Venezuela.”
—Andrew Charlton, “Funding Airport Infrastructure: A Global View,” Aviation Intelligence Reporter, Summer 2017

“Americans for Fair Skies, a lobbying arm of Delta Air Lines, has launched the most desperate and silly anti-Open Skies argument yet. It claims Gulf carrier competition puts U.S. national security at risk by endangering the Civil Reserve Air Fleet (CRAF) program. They argue that because Gulf carriers compete head-to-head with the Big Three in a grand total of two markets—New York-Milan and Newark-Athens—lost international share is such a threat that the Big Three will be unable to maintain their widebody fleet in support of the national military need for supplemental airlift. You cannot make this stuff up!”
—Kevin Mitchell, “Desperation in the Air: The Anti-Open Skies Crowd’s Silly CRAF Argument,” Business Travel Coalition, June 5, 2017

The good news is that there was no airport screening fiasco over the Independence Day weekend last month. The bad news is that TSA, airlines, and airports threw together a mix of mostly one-time fixes that are not sustainable over the long term. As aviation consultant David Swierenga told columnist Justin Bachman, “In my view, it’s a problem waiting to recur. I haven’t seen that they’ve done any substantive changes in their procedures or manpower, so I don’t see that the problem is fixed.”

The bundle of one-time, non-sustainable fixes for the summer include the following:

More overtime during these several months (July 4th through Labor Day);

About 600 temporary contract workers hired by airlines to assist with non-screening duties at checkpoints;

A reported 1,000 part-time screeners converted to full-time, with no indication as to how long this status will last; and,

Some of TSA’s 2,660 Behavior Detection officers assigned some of the time to screening duties (since Congress merely allowed TSA to do this, rather than mandating that they convert them all to full-time screeners).

The only permanent changes, which will continue to reduce congestion and wait times, are the addition of 600 newly hired screeners (most still in training as of early August) and the planned installation of new, somewhat faster checkpoint carry-on luggage equipment at selected hubs of American, Delta, and United, at their own expense. This equipment is being installed at only a few large airports: Atlanta, Chicago O’Hare, DFW, Los Angeles, Miami, and Newark. The only airport where the new lanes are in operation this summer is Atlanta. And, please note, at airports where the major hub carrier operates from its own concourses (e.g., DFW, LAX, MIA), only those checkpoints will be getting the new gear. If you’re flying other airlines and using the other checkpoints, you’ll be stuck with the old, slower lanes.

Among the major often-congested airports not getting the new equipment are Charlotte, Chicago Midway, Denver, Detroit, Minneapolis/St. Paul, New York LaGuardia, New York JFK, Philadelphia, Phoenix, Seattle, Washington Dulles, and Washington Reagan.

TSA has been reporting amazingly short average wait times at major airports. For example, a Denver Post headline July 19th read “Wait to Clear Security at Denver Airport Hovering Around 10 Minutes, TSA Says.” In researching this article, I checked www.ifly.com, which provides detailed wait times for major airports, broken down by time of day and by checkpoint. Out of 24 time blocks at Denver’s centralized checkpoints, only four were in the 0-10 minute category; all the rest were in the 11-20 minute category. Not exactly “hovering around 10 minutes.” I used the same site to compare wait times at SFO (which has privatized screening) and LAX (with TSA screening). Both are major hubs (designated Category X by TSA), and both have checkpoints for each of a number of terminals. Out of all the time blocks at all the terminals, 32% of LAX’s were in the 0-10 minute category, with the rest at 11-20 minutes. At SFO, 46% were in the 0-10 minute group, the balance at 11-20 minutes.

TSA has never provided data comparing screening wait times at the 22 airports with screening provided by TSA-vetted security firms and comparable airports with TSA screeners. This lack of transparency should not be surprising, since TSA is both the aviation security regulator and by far the largest provider of screening. Not only that, there is a standard clause in TSA contracts with screening companies that forbids the companies from disclosing any data about their performance. I’ve long argued that Congress should separate screening from regulation, to remove TSA’s built-in conflict of interest. But in the interest of greater transparency, the least Congress could do would be to mandate full disclosure of screening performance, vetted for transparency by the Government Accountability Office.

Thanks to the diligent investigative reporting of the Daily Beast‘s Barbara Peterson, the whole air travel community now knows that TSA’s monopoly PreCheck sign-up contractor, Morpho Trust, has been preventing the planned major expansion of PreCheck. (“The TSA Company Suing the Feds and Keeping Airport Lines Clogged,” Barbara Peterson, The Daily Beast, July 1, 2016)

As I have recounted several times in recent years, TSA has struggled since 2013 to implement a third-party recruitment and vetting program under which big-data companies would market PreCheck to large numbers of air travelers, potentially partnering with major employers, trade associations, business parks, etc. Some of the companies proposed totally online enrollment, based on the premise that their pre-screening algorithm would reliably select low-risk candidates without the need for fingerprinting. Sources tell me that TSA had approved one or more such algorithms in previous rounds of testing, but the RFPs to solicit actual bids from pre-qualified companies were withdrawn several times in recent years, due to objections from privacy groups. A revised RFP was finally issued last fall, with the expectation that winning firms would be selected early in 2016 and have their large-scale recruitment efforts under way by summer. Among those widely believed to be planning to bid were AAAE, Clear, and Morpho Trust.

Unfortunately, in January Morpho filed a bid protest with the Government Accountability Office, alleging that TSA’s procurement method was illegal. GAO released its finding on May 16th, rejecting Morpho’s claim as unfounded. But the company then filed suit in federal court—which put the whole procurement on indefinite hold. TSA was given until July 22nd to respond to the suit, and a decision is not expected until October—after which Morpho might appeal.

Morpho evidently wants to have things its way, regardless of the impact on airports and air travelers. While the lawsuit drags on, it is expanding PreCheck enrollment centers under its current monopoly contract with TSA—adding temporary “pop-up” sites at places like Penn Station in New York and the Willis Tower in Chicago. If it wins the suit, its monopoly will remain as TSA’s only PreCheck sign-up contractor. If it loses, it still hopes to be selected as one of the new third-party providers. Heads I win; tails you lose.

TSA Administrator Peter Neffenger told a Senate hearing in June that, despite the lawsuit, “We are in the process of reviewing the submissions to the RFP and expect to award in late 2016.” That may actually happen, if Morpho does not appeal or if its appeal is swiftly denied. Under this optimistic scenario, large-scale PreCheck expansion could get under way early next year, in time for next summer’s peak travel season. But for this one company’s actions, many millions more people would already be using faster and more convenient PreCheck lanes this summer.

Canada’s relatively new Liberal government promised a large increase in infrastructure investment. And its March budget made reference to privatization and long-term public-private partnerships as means to that end. Recently it seems to have embraced the Australian concept of “asset recycling,” under which the government leases or sells major assets (airports, seaports, toll roads, etc.) to investors—and uses the proceeds to invest in needed new infrastructure.

Last month Transport Canada revealed that it is now looking into the possibility of privatizing the country’s major airports, which are owned by the federal government but operated by local nonprofit airport authorities that must pay significant annual lease payments to the government—some $5 billion since 1992 and a projected $12 billion more over the next 40 years. That has led at least one airport authority—Airports de Montreal—to do its own research on airport privatization, as I reported in the March issue of this newsletter. ADM sent a detailed report to the government in April 2015, the conclusion of which was that “the time has come to consider the evolution of the Canadian model toward real privatization, based on corporatization.”

So far, however, ADM seems to be the only major airport looking with favor on the federal government’s policy. The CEOs of Vancouver and Ottawa airports are raising all the knee-jerk concerns one might expect. Craig Richmond of Vancouver Airport Authority warned that under privatization, “You would see cutbacks on maintenance, cleaning; you would see them become much more crowded because of pressures on the management to deliver that return [on investment].” Ottawa airport CEO Mark Laroche said the “unintended consequence” of privatization would be higher fees, and “The cost of flying in Canada is high enough; you cannot ask travelers to pay more.” Thus far, officials of the Greater Toronto Airport Authority have refrained from such rhetoric, perhaps because they have a better understanding of how privatized airports in the rest of the world are governed and managed.

As the Montreal airport’s 2015 study makes clear, given the significant market power that most large airports possess, there is nearly always some form of regulatory oversight to protect airlines and passengers from paying monopoly prices. Second, there are several different models of airport privatization from which to choose. The Annex to ADM’s 2015 study outlines three of them, as follows:

Outright sale via an initial public offering of 100% of the shares in the airport corporation, dubbed the BAA model as implemented in the U.K.;

Partial privatization, in which the federal government (and possibly lower levels of government) retains partial share ownership and is represented on the governing board (the German and French model); and,

Long-term lease/concession, in which the federal government retains ownership but leases the assets and liabilities for 50 to 99 years, under terms spelled out in the concession agreement (the Australian model).

All three models include provisions to protect the public interest, and to the extent that these might limit, for example, runway charges, that impact will be taken into account in how much airport companies, infrastructure investment funds, and pension funds will pay for the enterprise. In addition, one of the benefits of privatization to the airports in question will be getting out from under the onerous lease payments they must now make to the federal government.

Moreover, as Ben Dachis of the C. D. Howe Institute in Toronto wrote in the Financial Post (July 12th), privatized airports worldwide generate higher per-passenger revenues from shopping and dining than traditionally managed airports. And freeing the airports from the current obligation to pay ever-higher rents to the government should refocus their managements’ attention on investments to better serve their customers.

Given the knee-jerk opposition from the Ottawa and Vancouver airport managements, perhaps the wisest course for the Canadian government would be to begin by corporatizing the airports and then allowing each to choose the model that its board feels most comfortable with. This would provide something of a natural experiment to see which model produces which results.

A bill introduced in the House in June, HR 5563, would eliminate the federal cap on passenger facility charges (PFCs), eliminate federal entitlement grants for large hub airports, and cut the size of the Airport Improvement Program (AIP) budget by a corresponding $400 million a year. Called the “Restoring Local Control of Airports Act of 2016,” it was introduced by a trio of conservative members: Rep. David Jolly (R, FL), Rep. Thomas Massie (R, KY), and Rep. Gus Bilirakis (R, FL). The sponsorship is significant, in that historically some of the opposition to PFCs has come from conservatives, who incorrectly viewed PFCs as taxes rather than user fees.

Marc Scribner of the Competitive Enterprise Institute (CEI) produced a blog post providing some context for this PFC proposal (cei.org, June 24th). First, Scribner debunks the claim (typically made by airlines) that PFCs are taxes (or even more misleadingly, “federal taxes”). In fact, there is a long legal history on the differences between a tax and a user fee—basically that a tax is imposed on everyone for general government purposes, while a user fee is paid by those who use and benefit from a specific service, and is used only to pay for that service.

Scribner next provides some historical context. The PFC idea was first developed by the U.S. DOT in the latter years of the Reagan presidency. The first report on the subject in my own files was produced when Jim Burnley was Secretary of Transportation. DOT’s chief scientist at the time, Fred Singer, explained the rationale for PFCs in a 1990 Cato Institute publication as not merely devolving funding authority to airports but also freeing them, at least in part, from financial dependence on incumbent carriers, who would often insist on exclusive-use gate leases in exchange for long-term lease and use agreements. A new local source of revenue would enable airports to expand terminals to make room for new entrants. The first PFC legislation was enacted during the George H. W. Bush Administration in 1990, as part of its proposed National Transportation Policy.

In addition to these conservative bona-fides, PFCs also have the support of transportation researchers at institutions like the Brookings Institution. Its Cliff Winston, along with Northeastern University economist Steve Morrison, estimated that limited airport gate availability suppresses airline competition, costing air travelers about $4.4 billion per year in higher air fares (2005 dollars).

Unfortunately, HR 5563 was not included in the FAA reauthorization bill enacted by Congress last month. It had the support of AAAE, ACI-North America, and the U.S. Travel Association. But since the reauthorization only goes until autumn of next year, there will be plenty of time for it to be introduced and debated in the new Congress.

Security breaches other than in the terminal continue to increase, according to both a new report from the Associated Press and an audit by the Government Accountability Office.

AP released an update of its 2015 report on breaches of large-airport perimeters. The report, based on a survey of airport officials, identified 39 such breaches in 2015, up from 34 in 2013 but the same as the 39 reported in 2014. The top four airports over the period from 2004 through 2015 were San Francisco (41), Las Vegas (30), Philadelphia (30), and Los Angeles (26). AP’s tally for the entire period was 345 breaches, occurring at 31 airports that handle 75% of all U.S. passenger travel.

What AP found disturbing about its findings was not just the number, or the continuation of these occurrences year after year. It was also that some airports have not been disclosing perimeter breaches, and others argue that because the vast majority of the 345 were by amateurs, drunks, or misguided people—not terrorists—they should not be taken seriously as security breaches. But if people can jump an airport fence or walk through an open gate without being stopped—and sometimes get all the way to parked aircraft before being noticed—than that airport has a security problem.

Shortly after the AP report came out, GAO released the unclassified version of its audit of airport perimeter security and access control (GAO-16-632). Their auditors found that the combined total of perimeter and access breaches at all commercial airports had increased from 2,700 in 2013 to 2,900 in 2015. TSA keeps tabs on airport vulnerabilities in these areas primarily by conducting Joint Vulnerability Assessments (JVAs)—an activity performed by an FBI/TSA team. Between 2009 and 2015, JVAs were carried out at 81 airports, mostly the largest ones (Categories X and I). Extending this process to numerous smaller airports, TSA told GAO, was beyond its budgetary resources, but the agency agreed with GAO’s recommendation that it develop a self-assessment tool for smaller airports to use, instead of a JVA.

GAO also faulted TSA for not having updated its comprehensive 2013 Risk Assessment of airport perimeter and access security to take into account changes since then, and TSA agreed to do so.

Atlanta and Charlotte—both large fortress hub airports, with Delta and American, respectively, as their anchor tenants—recently signed new long-term airline lease agreements. Both continue the ongoing trend of such leases being considerably shorter than the pre-deregulation standard of 30 years. But aside from that, the two are quite different.

In Atlanta, Delta continued to throw its weight around, treating the airport as its own. In exchange for agreeing to another 20 years and committing to pay for half of a $6 billion expansion program, Delta got the city government to write into the lease that the city of Atlanta “does not currently plan to and will not own or operate any other airports of any type, as a part of any City airport system.” That pledge bolsters Delta’s several-year battle to prevent first Gwinnett County and now Paulding County from building a passenger terminal at each one’s small airport in hopes of attracting low-cost airlines. As for the $6 billion expansion of ATL, in addition to a new runway (which will help all airport users) the program includes a $900 million international concourse (likely used mostly by DL and its code-share partners) and some additional passenger gates. Whether those gates are exclusive-use to DL has not been disclosed.

By contrast, the new lease at Charlotte Douglas is for a mere 10 years, compared with the expiring 30-year lease. It continues sharing with airline tenants 40% of the profits from concessions and parking, in proportion to their enplanements. And it includes $500 million worth of new projects, including new gates. And those new gates will not be for American’s exclusive use. In fact, the new lease no longer includes a traditional “majority-in-interest” clause, under which incumbent airlines can veto any project that adds terminal and gate space for new entrants. This is good for Charlotte residents who may benefit from new competition by low-cost carriers. Agreeing to it was a statesman-like decision by American.

2016 Annual Privatization Report Online. The Air Transportation chapter of Reason Foundation’s Annual Privatization Report 2016 was posted this week. As in previous years, your editor is the author of this document, which covers airport privatization, air traffic control, and U.S. airport security. Go to http://reason.org/news/show/apr-2016-air-transportation.

LaGuardia Terminal Bonds 10 Times Oversubscribed. Revenue bonds for the $2.6 billion public-private partnership to replace the Central Terminal at LGA experienced demand 10 times as great as the amount of bonds on offer. The long-term concession deal is led by Meridiam, Skanska, and Vantage Airports. It is part of an overall $4 billion revamp that includes new parking structures and roadway changes, with those portions funded by the airport operator, the Port Authority of New York and New Jersey.

PreCheck Provides Increased Security at Lower Cost. A new study by aviation security researchers Mark Stewart and John Mueller finds that in addition to saving passengers time and saving TSA money, the risk-based PreCheck program likely provides a slight additional benefit in risk reduction. The detailed analysis is based on defensible assumptions and careful calculations. (“Risk-Based Passenger Screening: Risk and Economic Assessment of TSA PreCheck—Increased Security at Reduced Cost?” Mark G. Stewart and John Mueller, University of Newcastle, Report No. 283.06.2016, June 2016)

Ontario Airport Transfer Law Approved by Congress. Congress last month approved legislation granting federal approval to the negotiated deal that will transfer Ontario Airport from Los Angeles World Airports to the recently created Ontario International Airport Authority. The new entity will reimburse LAWA via payments of $120 million (from passenger facility charges) over the next decade, while OIAA will assume all current airport debt. LAWA invested nearly $500 million in ONT during the several decades it owned the airport.

GAO Calls for Risk-Based Air Marshal Policies. Based on an 18-month audit of the Federal Air Marshals Service (FAMS), the Government Accountability Office found that FAMS only gives lip service to risk-based decision-making. In its report (GAO-16-582), the auditors proposed ways in which FAMS could incorporate risk into its allocation of marshals between domestic and international flights, in its decisions about geographical focus areas, and in documenting the rationale for its international route deployments. The classified version of this report was released to relevant parties back in February; the sanitized version was released in June.

London City Expansion Approved. The U.K. government on July 27th approved London City Airport’s planned $450 million expansion plans. This will include expanding the terminal, adding a new taxiway, and providing additional aircraft parking room, which the airport company hopes will lead to increasing flights from 70,000 to a permitted 111,000 per year. The airport is now owned largely by Ontario Teachers’ Pension Plan and Borealis Infrastructure, both Canadian public pension funds.

Greek Airport Workers Call Off Strike. A planned five-day strike to protest further airport privatization in Greece late in June was averted at the last minute. After intervention by the Transport Minister, who offered further study of plans to privatize 23 more airports, union OSYPA agreed to call off the strike. Greek unions have a long history of opposing privatization of airports, seaports, and other infrastructure, much of which has been mandated by European bodies as conditions in exchange for bailouts of the Greek government. A previously agreed concession agreement under which Fraport is taking over 14 regional airports is proceeding as planned.

Reagan National Airport to Get $1 Billion Upgrade. To relieve significant overcrowding and improve the passenger experience, the Metropolitan Washington Airport Authority has launched a $1 billion renovation of DCA. It will include adding a new concourse for short-haul/regional flights, relocating security checkpoints to a lower level, and bringing the existing screening/lobby area and its shops and restaurants into the post-security zone. DCA currently handles over 23 million passengers a year, compared with design capacity of 15-16 million.

Belfast Outsources Control Tower Services. Belfast City Airport, in Northern Ireland, has shifted from self-provision of tower services to contract provision. The winning bidder in a three-way competition was NATS, the U.K. air navigation service provider, which already operated the towers at 13 other U.K. airports. Competing bids came from Air Navigation Services and from LFV, the Swedish air navigation service provider. Control towers in the U.K. are an airport responsibility, and they may either self-provide or contract with a certified provider. All existing tower employees at Belfast will join NATS and continue working at the tower.

Companies Bid for Paraguay Airport. Three teams submitted bids for the estimated $149 million upgrade of the airport in Asuncion, Paraguay’s capital city. The teams were led by Vinci, Sacyr, and CEDICOR, respectively. The winning team will acquire a 30-year concession for the airport, and will be responsible for investing in terminal and runway improvements.

Albany Security Proposal Raises Civil Liberties Concerns. Albany County, New York officials stirred up considerable opposition when they proposed to make refusing security screening at Albany Airport a misdemeanor. The proposal was submitted as a bill to the state legislature, but has come under fire from the New York Civil Liberties Union and Muslim groups. The proposed law was intended to apply to those flagged for additional screening who decide to not make the plane trip after all. But the way it is written, it could also apply to anyone who leaves the line even before reaching the metal detector.

Brazil May Sell the Rest of Rio and Sao Paulo Airports. The financially strapped Brazilian government, which partially privatized its major airports several years ago, is taking a fresh look at selling the government’s remaining shareholdings in Santos Dumont Airport in Rio and Congonhas Airport in Sao Paulo. The change is part of the reform agenda of interim President Michel Temer. The government plans a number of asset divestitures as part of its overall debt- and deficit-reduction efforts.

India to Allow Full Foreign Ownership. As part of a broad economic liberalization, the Indian government announced in June that it will permit investors, regardless of nationality, to own 100% of major airports. Last fall this provision was initially approved for brand-new (“greenfield”) airports, but the decision in June extends the policy to existing airports, most of which are in need of serious investment for expansion and modernization.

Delta Refinery Operating at a Loss. For the first half of 2016, Delta Airlines’ much-touted oil refinery in Trainer, PA achieved a $38 million operating loss. The airline purchased the refinery in 2012, on the premise that doing so would guarantee it access to fuel at lower cost. Most economists would have advised against such a deal, on grounds that the price of jet fuel is set in global markets, and Delta would be foregoing revenue if it sold itself oil that it could have sold to others at market value.

Winners Announced for French Airports. The second round of bidding for the French national government’s 60% stake in the Lyon and Nice airports yielded bids from 11 teams by the July 4 deadline. Winning the competition for Nice Cote d’Azur was the team led by Atlantia and EDF Invest, bidding $1.35 billion. And the winner of Lyon-Saint-Expury was the consortium of Vinci/Caisse des Depots/Predica, bidding $593 million.

Newark Slots Yield Winners and Losers. Thanks to the FAA reclassifying Newark (EWR) as a less-congested Level 2 airport (previously Level 3), its former limit of 81 landing/take-off slots per hour will be lifted this fall. And thanks to the Justice Department denying permission for dominant EWR carrier United to acquire 24 more slots there from Delta, the “value” of United’s hoarded slots has fallen. It announced on July12th that it will write off $264 million due to the slot changes. Meanwhile, airlines whose presence at EWR was highly restricted, have begun discussing added service there, including JetBlue, Southwest, and Virgin America. And ultra-low-cost carrier Allegiant recently announced plans to launch service from EWR this fall.

“The agency [TSA] has resolved nothing It just threw an unsustainable amount of human labor at the problem. The demand for security checkpoint services is still up an arguable 7 percent over 2013, just as it was in May. And TSA’s budget is still 10 percent smaller, just as it was six weeks ago.”
—Dan Reed, “Fooled Again! TSA Used Tricks to Cut Holiday Wait Times but Still Hasn’t Rightly Defined the Problem,” Forbes.com, July 7, 2016

“Our adversaries have more or less given up on the notion of grandeur. When before they seemed focused on spectacular attacks on iconic infrastructure, terrorists today seem content to assault everyday locations—cafes in Paris, parties in San Bernardino, and clubs in Orlando. The breakdown in assumptions means that virtually none of our [security] doctrine fits any longer. Pushing the borders out is useless when borders don’t matter. Focusing on preventing significant and high-consequence events is wrong if the targets now are the stuff of common, daily life. And if everything is a potential target, we can’t afford layers of defense. Give our resources, we can barely afford a single layer of questionable effectiveness (like the bouncer at the club or the security guard at the mall).”
—Paul Rosenzweig, “Rethinking the Doctrine of Homeland Security—Reflections on Orlando,” Lawfare, June 29, 2016

“Take the long security screening lines that have become the bane of air travelers everywhere. An ambitious terrorist could easily detonate a bomb in the crowd, killing hundreds and scaring Americans away from air travel—possibly for good. Moving the lines further out of the airport simply recreates the problem elsewhere. And as security measures become more stringent, our freedom to travel is encumbered, though we aren’t any safer than before.”
—Gary Leff, “A Choice Too Far?” Doublethink, Winter 2002 (http://americasfuture.org/a-choice-too-far)

“Only a handful of airports participate [in the Screening Partnership Program], as TSA chooses the security company and micromanages the contract. That isn’t a partnership. Congress could stipulate that an airport manage its own bidding and operations; the government would remain as a safety regulator. Executives at Hartsfield-Jackson in Atlanta and elsewhere have floated dropping TSA, but without Congress that’s about as useful as hiring circus entertainers to distract the disgruntled, as San Diego International tried recently.”
—”The TSA’s Summer of Lines,” editorial, The Wall Street Journal, May 28, 2016

Small airports and lawmakers from rural states have expressed great concern about proposals for reform of the air traffic control system, fearing that a cost-conscious ATC corporation might eliminate night shifts at control towers, shut down “marginal” towers, or not add such towers at airports that need them. “I would rather put my eggs in the basket of Congress rather than a 13-member private board making decisions nationwide,” Sen. Jerry Moran (R, KS) told a reporter from The Hill recently.

To be sure, small airports today face reduced airline service and an FAA moratorium on any additions to the contract tower program (which allows smaller airports to have a control tower at far-lower cost than a conventional FAA tower). If and when FAA lifts its moratorium, small airports will only get a tower if FAA detrermines that its benefits (to FAA and the airspace system) exceed its costs.

But there is another possible future. In a new report, airports expert Steve Van Beek explains that Remote Towers offer a new alternative for America’s small airports. In contrast to a conventional tall structure with a control cab on top, a Remote Tower puts the control cab on the ground (at lower cost) and relies on an array of high-tech cameras mounted on one or more tall poles at the airport. Because the cameras include infrared, they provide better views at night, in rain, or in fog than the out-the-window view from a conventional tower. And the controllers’ equipment and displays can include object tracking and alerting, both in the nearby airspace and on the airport surface, increasing safety.

Remote towers are already certified and in operation at small airports in Sweden and Norway, and similar projects are under way in Germany, Ireland, and the United Kingdom. These Remote Tower projects are being implemented by the ATC corporations of those European countries, as a way to improve and expand tower services.

Unfortunately, the FAA has no Remote Tower program, and has no known plans to develop one. This is ironic since some of the original research on the concept was carried out a decade ago at the FAA Tech Center in Atlantic City. But budget pressures and cost overruns on NextGen programs seem to have precluded any FAA Remote Towers program. There are two pilot projects under way here—one at Leesburg, VA and the other at Loveland, CO—but neither is FAA-funded.

That is tragic, because if Remote Towers were approved for use in this country, they would enable more small airports to qualify for a contract tower, as Van Beek explains in the report. Because of its increased performance in all kinds of weather, the benefits of an RT should exceed those of a conventional tower. And the costs of an RT would generally be significantly lower than a conventional tower. Larger benefits and lower costs means a higher B/C ratio.

Looking ahead, Van Beek (a former member of the FAA Management Advisory Council) suggests that the likelihood of a funded contract tower program, including Remote Towers, would be greater if the ATC system had a reliable revenue stream that could support bonds for modernization (like the bonds airports issue). The FAA MAC actually recommended that the Air Traffic Organization be converted to a nonprofit entity similar to the European ATC providers that are already implementing Remote Towers at small airports. And if airports, general aviation, controllers, and regional airlines were part of the governing structure, that could be a workable model. Download the brief here: http://reason.org/files/air_traffic_control_remote_towers.pdf

The White House has called for increased private investment to improve America’s transportation infrastructure, and investors are stepping up the pace, with major public-private partnership (P3) deals under way at Austin, Denver, LaGuardia, and (potentially) Kansas City.

P3s differ from traditional design-build construction contracts. The scope of a long-term P3 concession includes design, build, finance, operate, and maintain. This model is widespread in parts of Europe and South America, but has seen little use in the United States until recently. One example is the terminals at Orlando Sanford airport. Another—this time applied to the entire airport—is the 40-year lease of the San Juan International Airport in Puerto Rico, under the federal Airport Privatization Pilot Program. Indeed, under the terms of that program, air carrier airports may not be sold (which is what “airport privatization” often means in Europe); here, they may only be long-term leased.

I’ve covered the $2.8 billion LaGuardia Central Terminal replacement project in previous issues. That P3 project was financed by $2.5 billion in tax-exempt bonds issued by the airport operator (Port Authority of New York & New Jersey) and $300 million in equity from concessionaire Skanska Infrastructure Development, Vantage Airport Group, and Meridiam. Demand for the bonds exceeded supply by 10 times, at an interest rate of 3.27%, tax-exempt. Funds pledged for debt service on the bonds will come from airline terminal-use payments (up to 85%) and the rest from retail concessions. A much larger make-over of JFK International has been proposed by New York Gov. Andrew Cuomo, in which $7 billion of the projected $8 billion costs is expected to be raised via P3 deals.

Austin’s project is far smaller, but was developed along the same lines. The aim was to redevelop the unused South Terminal as a no-frills home for ultra-low-cost carriers, with airline use payments at half the level charged in the main terminal. The airport selected Oaktree Capital Management (which was part of the consortium that has redeveloped the San Juan Airport under the federal pilot program) to develop the new South Terminal P3 approach. They set up LoneStar Airport Holdings as the project-specific concession company, which designed and carried out the $12.5 million renovation of the South Terminal and will operate and manage it for 30 years. The renovation was completed last winter and the terminal opened in April, with Allegiant Air and Texas Sky moving in. The no-frills approach has been developed in a retro-style, reminiscent of the “golden age of flying” in the 1960s. There are no jetways, just traditional air stairs from the tarmac to the planes. And the styling of the terminal is mid-century modern.

On a vastly larger scale is the make-over of the main terminal at Denver International Airport. Though opened only 22 years ago, DIA has already exceeded its design capacity of 50 million annual passengers; the revamped terminal will be sized for 80 million. Under a $1 billion, 34-year P3 concession, Ferrovial Airports will rebuild the Great Hall, relocating TSA screening lanes during a four-year design and construction period. This will free up space to triple the retail concessions in the Great Hall (post-security), generating additional revenue as Ferrovial operates the revamped terminal over the remaining three decades. The P3 agreement shifts the risk of construction cost overruns to Ferrovial, and allows the airport to get the massive project done in the near term, to cope with the projected growth.

Kansas City is embroiled in the latest phase of a long-standing contretemps about whether to replace its pre-deregulation multi-terminal design with a state-of-the-art single terminal with centralized TSA screening. Many residents of the area prefer the current configuration, which allows them to park close to the terminal they will use, but airport directors and others have long called for a single-terminal replacement, as more efficient. Political pressure led the city to enact an ordinance requiring any new terminal plan to be put to the voters for decision.

In this environment, the city this spring received an unsolicited proposal from KC-based airport developer Burns & McDonnell to finance and build a new $1 billion single terminal to replace the existing ones. Several weeks later, a larger firm, AECOM, asked for an opportunity to submit a competing proposal. It suggested the city consider not merely design-build-finance (per Burns & McDonnell) but a long-term P3 concession that would also include operating and maintaining the terminal (a la Denver). After some debate, the City Council issued a request for qualifications, due August 10th, under which firms can submit their bona-fides to design, build, and finance a new 750,000 sq. ft. terminal and parking garage with at least 6,500 spaces. That is not really a P3, in the sense being used by other airports, and it will be interesting to see if any of the teams seek to go beyond its terms.

In the March 2017 issue of this newsletter, I reported on the panic and chaos that ensued at Fort Lauderdale International Airport (FLL) in the aftermath of a lone-gunman attack in the baggage claim area of one of its four terminals, on January 6th. A new report, from the Broward County Sheriff’s Office (BSO) was covered in a June 4th front-page story in the South Florida Sun-Sentinel: “BSO Cites Own Flaws in Airport Shooting.” The report indicts both the agency itself and also FLL airport management.

To recap, the previously known basics were as follows. The lone gunman killed five and injured six other people in the baggage claim area of Terminal 2, after which he was captured by sheriff’s deputies on duty at the airport. That should have been the end of it, but was not. With social media disseminating news of the shootings, 90 minutes later, false reports circulated about gunfire in all four terminals, leading to mass panic and uncoordinated evacuation onto the tarmac and into the parking structures. That much we already knew.

But as the 99-page report from BSO details, the responses to this panic were also chaotic and uncoordinated. Investigators were still containing the crime scene as this new panic began, but Terminal 2 had not been shut down. BSO then sent out a general call for backup from law-enforcement agencies throughout South Florida, resulting in more than 2,000 officers descending on the airport in an uncoordinated manner, clogging radio frequencies, leaving parked police cars in the way of BSO’s mobile command post and blocking evacuation routes for airport customers’ cars.

But it was not just a law-enforcement failure. According to the BSO report, the Aviation Department “failed to follow its own evacuation plan, resulting in a breach of security in all four terminals.” It “denied access to airport blueprints to SWAT teams seeking to sweep and secure the terminals.” Its staff removed luggage from Terminal 2 before it could be screened for evidence. And with passengers being stranded for up to 10 hours, nobody provided food, shelter, or medical attention. (All quoted material is from the Sun-Sentinel article, not the BSO report itself.) As this is written, the Aviation Department has not issued its own assessment of the fiasco, which is being done by an outside consultant.

What is very clear from this account is that neither the airport management nor local law enforcement were at all prepared for the kind of panic that was spread by social media more than an hour after the lone gunman had been taken into custody. Whatever emergency drills the airport carries out, in accord with FAA and TSA mandates, are obviously not capable of coping with this kind of situation, which has occurred within the past year at three large hub airports: FLL, JFK, and LAX. Changes in communications and video capability, an on-airport command post, possibly gunfire detectors in terminals, and a very clear chain of command for dealing with major security emergencies all need priority attention.

None of these incidents were cases of terrorism, and each could have been contained. The next one may be far more of a threat—especially if airports remain woefully unprepared.

In late June, both the House Transportation & Infrastructure Committee and the Senate Commerce Committee marked up their bills to reauthorize the Federal Aviation Administration. Notably absent from both bills were reforms to the Passenger Facility Charge (PFC) and to the Airport Privatization Pilot Program. Airports, and the state and local governments that own them, should make their voices heard about the need to reform both programs.

Although the White House Fact Sheet on its Infrastructure Initiative mentioned neither of these reforms specifically, both are consistent with its principles. Among those principles are creating a better balance between the federal role and that of states and localities that own nearly all transportation infrastructure. The principles also seek to “encourage self-help” and “leverage the private sector.”

Increasing or—better still—removing the federal cap on airports’ self-help funding mechanism, the PFC, would be entirely consistent with these principles. And if removing the cap is coupled with eliminating AIP grants for large hubs (which could easily replace those grant monies with PFC revenues), the combination should have broad appeal to fiscal conservatives in Congress. That was illustrated by HR 1265, the bipartisan bill by Rep. Thomas Massie (R, KY) and Peter DeFazio (D, OR). With both of them being members of the House T&I Committee, it’s a mystery why they did not offer this as an amendment to the House reauthorization bill. A number of center-right groups, including the Competitive Enterprise Institute and FreedomWorks, have supported this approach. And both the Business Roundtable and the National Association of Managers support at least an increase in the federal PFC cap.

The other omission is much-needed reform to the FAA Airport Privatization Pilot Program. Given both growing U.S. interest in the program—Airglades, St. Louis, and Westchester now have slots, and Nashville is considering applying for one—and the interest of the global infrastructure investment community, the United States is missing out on opportunities to recycle important infrastructure assets, as numerous other countries have done. Airport privatization is a timely enough topic that it is being featured in a session at the Airports Council International-North America conference in Fort Worth this September.

The current Pilot Program is more of an obstacle course than an invitation. Now that airport privatization is a well-accepted global phenomenon, the opportunity should be open to any and all airport owners that wish to consider it. The arbitrary limits—only 10 airports, only one large hub, at least one GA airport—are silly and obsolete. So is the double super-majority airline approval requirement: nothing like that exists anywhere else in the world. And the cumbersome bureaucratic procedure to get from initial application for a slot to final approval—often several long years—is also uniquely American, and foolish. Thus, a sensible reform would:

Remove the limits on the number and types of airports that could be privatized;

These changes would not require any airports to be privatized. But they would give state and local officials the opportunity, if they chose, to recycle the asset value of their airport into either building other needed infrastructure or shoring up their under-funded public pension systems.

The good news is that international aviation has dodged a major bullet—a proposed ban on laptops and other electronic devices in carry-on luggage that was poised to be applied to all airports with nonstop flights to the United States. Since carrying very large numbers of such devices (with their flammable lithium-ion batteries) in the cargo hold posed a serious fire risk, the end result could well have been a ban on air travel with laptops and other electronics. And that would have devastated international aviation and much business and tourist travel to and from the United States. So that threat has been avoided.

The bad news is that the Department of Homeland Security’s alternative will impose many billions of dollars of new cost on the world’s airlines and/or airports. Enhanced screening will be required at airports with flights serving the United States from 280 airports in 105 countries, with 180 airlines operating an average of 2,000 daily flights. The exact requirements have not yet been made public, but will include enhanced screening of passengers and their luggage, as well as new protocols for security within terminals and on the ramp.

The initial requirements, for the first 21 days(!), include the use of explosive trace detection equipment, costing $25K to $50K per unit. A more-costly longer-term solution is to replace existing two-dimensional carry-on baggage scanners with 3-D scanners like those used for checked baggage. The latest generation of these, available from four U.S. firms, promises faster but more-accurate screening than current 2-D scanners. They can reportedly detect explosives by measuring the density of imaged objects within carry-on bags. This could mean passengers in regular screening lanes (not just in PreCheck lanes) could leave their electronics within their bags, rather than removing them prior to scanning. That would also increase the throughput of the screening lanes.

American Airlines has announced a commitment to spend $6 million on 3-D bag scanners for checkpoints at its eight largest U.S. airports, once the scanners receive final TSA approval. The airline and TSA have been testing them at Boston and Phoenix in recent months.

But the United States does not have direct control over airport screening practices in other countries, so the new requirements for enhanced screening for flights heading to our shores will apparently be imposed on the airlines providing those flights. Since most overseas airports do not have concourses dedicated to specific airlines, but rather have screening lanes serving an entire terminal or airport used by multiple airlines, the new requirements will impose numerous airport-specific difficulties, and it’s far from clear who will bear the costs of the new enhanced security.

It’s been many, many years since I held a Secret clearance, for my first two jobs out of MIT engineering school. In writing about this, I am assuming that the threat information recently analyzed by DHS, and provided to certain congressional committees in classified briefings, is as ominous as appears to be the case, from the actions DHS is now taking without protest from Congress. But I will also repeat what I’ve said many times before about aviation security issues. Major actions such as this new DHS mandate can only be justified if the benefits (in lives saved, etc.) are greater than the costs, which in this case will be many billions of dollars. At this point in time, we can only hope that somebody in authority has done those calculations and demonstrated that this holds true.

Toronto Airport May Be Worth $3.2 Billion. Bloomberg reported in May that the Canadian government is considering selling a minority stake in Toronto Pearson International Airport, which was valued at $3.2 billion in a confidential report to the government by Credit Suisse. Brookfield Asset Management’s Sam Pollock said that if the airports are put on the market, there would be a “feeding frenzy” among infrastructure investors, and the C.D. Howe Institute’s Steven Robins told Bloomberg that “The market for assets like this is at an all-time high.”

London City Airport Opts for Remote Tower. To free up space on this airport serving the Canary Wharf business community, the airport has worked with ATC company NATS to replace its 30-year-old control tower with the UK’s first remote tower. Controllers will operate the remote tower from the NATS center at Swanwick, 80 miles away. The technology for the system is being provided by Saab Digital Air Traffic Solutions, which is also the provider of remote tower facilities in operation at two small airports in Sweden. Saab is also providing the technology for the remote tower demonstration at the Leesburg, VA airport.

Nashville Mayor Considers Airport Privatization.Oaktree Capital Management made a presentation to Mayor Megan Barry in May on a potential long-term lease of Nashville International Airport. The mayor and other city officials are interested in recycling the asset value of the airport to help fund other local infrastructure, including a new transit system. The Tennessean reported that city officials are closely following the progress of St. Louis, which has won a slot in the federal Airport Privatization Pilot Program.

Alaska Airlines Commits to Serving Paine Field in 2018. Following the start of construction of a passenger terminal at Paine Field north of Seattle, Alaska Airlines on May 17th announced that it would launch commercial service there once the new terminal is operational. Alaska’s initial service would be nine daily departures, using both Boeing 737 and Embraer 175 aircraft. Specific routes and prices will be announced early in 2018. The terminal is being developed and will be operated by a private company, Propeller Airports.

Oaktree Exits San Juan Airport. After having played a key role in privatizing, via a 40-year lease, the San Juan International Airport, Oaktree Capital Management has sold its 50% interest in the concession company, Aerostar, that won the bidding to modernize and operate the airport. Oaktree sold a 10% stake to its original partner, Mexican airport operator ASUR, and sold the remaining 40% to a Canadian pension fund, Public Sector Pension Investment Board (PSP Investments).

Sydney Airport Declines Option to Develop Second Airport. When Sydney International Airport (Australia’s largest) was privatized in 2002, one provision of the 99-year lease agreement was that if and when the government got around to green-lighting the development of a second Sydney airport, concessionaire Sydney Airport Group would have first dibs on becoming the second airport’s developer/operator. When the government decided to go forward with the Western Sydney Airport (at Badgerys Creek) this spring, Sydney Airport Group said thanks, but no thanks. The company said it did not want to take on the “considerable risks” of developing and operating a new airport, and will therefore face a competitor once the new $5 billion airport is completed.

Atlanta Airport Opts for Continuous Background Checks. Airport workers are a potential security threat, and there have been many cases of baggage theft and smuggling of guns and drugs by such employees, who have access to the secure areas and aircraft but have only had an initial FBI background check when they are hired. Hartsfield-Jackson International Airport has decided to make use of an FBI service called Rap Back, facilitated by TSA. Under Rap Back, the FBI retains employee fingerprints and does ongoing criminal history checks, so that it can alert the airport of any new criminal activity. Rap Back costs less than the airport’s current practice of fingerprinting all employees every two years.

Athens Airport Concession Renewed. The current Athens International Airport was developed under a long-term concession with private investors (AIA) in 1995. As the 25-year expiration of that agreement nears, AIA has been negotiating with the government for a 20-year extension. On June 2nd, a tentative agreement was reached, subject to final approval by the government’s Court of Auditors. AIA will pay the government $672 million for the extension, and will commit to a total investment in the airport of $2.63 billion over the 20-year period.

New Device Will Detect GPS Interference Near Airports. Back in 2009, portable GPS jammers used by truckers passing Newark Airport led to a three-year delay in gaining operational status for the Honeywell GBAS, a GPS-based alternative to conventional instrument landing systems. More than 80 such incidents have been reported at airports worldwide since 2013. Aviation Daily reported (May 26th) that Spirent Communications has released a portable device that can detect such jamming up to 1,600 feet away from its location. It is applicable not only to GBAS but also to space-based GPS systems such as WAAS in this country and EGNOS in Europe.

New Greek Airport to Be Developed by GMR Infrastructure. Leading Indian airport developer/operator GMR submitted the sole bid to develop and operate the planned new airport in Heraklion, the largest city in Crete. The bid was €480 million, half the expected amount. GMR, which is involved with three airport public-private partnership (P3) projects in India, teamed with Greek firm GEK Terna for the 35-year design-build-finance-operate-maintain concession.

Second Airport for New Delhi to Be a P3 Project. A $2 billion, four-runway airport has been proposed to the Indian national government by the state of Uttar Pradesh and approved by the Ministry of Civil Aviation. The site of the Noida International Airport is 45 miles from the existing Indira Gandhi International Airport, which is expected to reach capacity by 2024. The government plans to select a concessionaire via a competitive bidding process.

Serbia Qualifies Five Teams to Bid for Tesla Airport. On June 20th, the government of Serbia announced the five international teams that have been short-listed for the privatization of the Nikola Tesla Airport in Belgrade. The expected concession fee is in the $550 million range, and the winner will have to invest an estimated $795 million to add an additional terminal at the airport.

Correction Regarding Middle-East Airports. Airline expert Gary Leff emailed in response to last issue’s article about the U.S. ban on laptops and other electronics in the cabins of airliners serving the United States from 10 airports in the Middle East and North Africa. My article had said that four of these airports have preclearance facilities—but Leff informed me that only Abu Dhabi has such a facility. He added that this airport also does additional secondary screening for U.S.-bound flights, overseen by DHS. Unfortunately, similar services are not provided at Dubai, Doha, and Kuwait City.

“IATA must strive to convince regulators that dealing with security threats by reacting to specific incidents makes no sense. That a passenger was able to blow up a laptop on a flight from Mogadishu, Somalia, to Djibouti says nothing about security levels at big international airports. Denying the wholesale use of laptops in cabins is akin to forcing all travelers to go barefoot on flights following the ‘shoe bomber’ incident in December 2001. View the bigger picture; don’t seek to make one very particular scenario impossible. The key is to promote measures to secure earlier detection.”
—Jens Flottau, “One Voice, Strong Message Needed,” Aviation Week, May 29-June 11, 2017

“The success of sixth-freedom carriers shows how outdated bilateral traffic rights have become. To compound the problem, the Chicago Convention [1944] has spawned a web of now-anachronistic rules—for example, the requirement of national ownership and effective control. This deems that a carrier serving a ‘national purpose’ must be controlled by the citizens of that nation. Security-sensitive companies in banking, telecommunications, and cyber security can buy peers in other countries. Airlines, as a rule, can’t. Airlines need to break free from these archaic constraints. Open-skies agreements point in the right direction: they spur competition, growth, and value creation for all stakeholders. While some open-skies agreements are more open (the European Union’s) than others (the ASEAN’s), there is no evidence that deregulation and increased competition have created any threat to national interests of the countries involved.”
—Philipp Goedeking, “Rule-Based Approach Must Triumph,” Flight Airline Business, June 2017

Last year Canada’s government led by Justin Trudeau set forth its plan to invest large sums in the country’s infrastructure by emulating Australia’s Asset Recycling program. The plan was proposed by the government’s then-new Advisory Council on Economic Growth, led by the global head of McKinsey. The idea was for the government to sell or long-term lease revenue producing assets (such as airports and seaports) and use the proceeds to invest in other needed infrastructure, rather than issuing bonds that would have to be paid off by taxpayers. In the airports area, the Finance Minister and the Transport Minister commissioned a valuation study by Credit Suisse to get some idea what the eight largest airports are worth in today’s market.

That was then; this is now. The managements of the Calgary, Ottawa, and Vancouver airports in February launched an anti-privatization website highlighting alleged “risks” of selling the airports. They have placed op-eds in leading Canadian newspapers claiming that investor ownership would lead to higher costs for air travelers using those airports—or even drive more such passengers across the border to nearby U.S. airports. (That cross-border phenomenon has grown fairly large in recent years due to the requirement that Canada’s nonprofit airport authorities must pay up to 12% of their gross revenue to the federal government as “Crown Rent,” since the feds still own the land on which the airports sit—a provision that would be eliminated under privatization.)

City council members in Montreal and Toronto have also inveighed against privatization, though those governments have no direct role in the process. The nonprofit airport boards typically include only one or two members appointed by local councils. Montreal airport’s CEO was one of the prime movers in advocating privatization, prior to his recent retirement, and its current management has taken no public position on the question. Toronto’s Pearson International Airport recently surprised many people by saying they would welcome private capital investment, in part to pay for the addition of a major transport hub at the airport.

A national poll conducted by Angus Reid Forum in April found that 53% of Canadians polled thought airport privatization was a bad idea. But the pollsters noted that 51% of those polled had never heard of the issue before being contacted for the poll, raising questions about what they thought privatization would mean.

In the face of all this, the federal government is now sending vague and mixed signals. Finance Minister Bill Morneau will not release the results of the Credit Suisse valuation study, and Transport Minister Marc Garneau has been noncommittal about whether airport privatization will go forward. And last month, Prime Minister Trudeau downplayed asset recycling, telling reporters he’s more interested in attracting outside capital via his proposed national infrastructure bank than by selling assets.

But there are several reasons for Canadians to take a harder look at what’s involved. First of all, though we don’t know what valuations Credit Suisse came up with, a February study by Steven Robins for the C. D. Howe Institute estimated the market value of the eight airports at between $7.2 billion and $16.6 billion. Obtaining ownership of the airports by making a one-time payment to the Canadian government would end the requirement to pay Crown Rent, immediately reducing the airports’ cost base. But wouldn’t passengers end up stuck paying for the billions in acquisition costs, as the opponents of privatization charge?

Here’s where market incentives come into play. Though the airports may look like monopolies, they face various forms of competition—passenger rail, for example, between Montreal and Toronto, and driving to nearby U.S. airports as many Canadians already do. Those competitive alternatives will limit how much passengers can be charged to use the newly privatized airports. So the airports’ alternative way to raise more revenue will be to embrace increased retail opportunities for passengers. In a March 23, 2017 policy memo to the Transport Minister, the Howe Institute’s Ben Dachis and Vincent Thivierge compared five privatized Australian airports with the eight large Canadian airports. The Australian ones derive the majority of their revenue from voluntary purchases by passengers, in sharp contrast to Canadian practice of getting the large majority of their revenue from mandatory fees. They also point out that the Canadian government’s Crown Rent—a charge of up to 12% of gross airport revenue—is a disincentive to coming up with new sources of voluntary passenger revenue.

In my view, Canada’s federal government is missing a bet by backing away from Asset Recycling based on airport privatization. But instead of making an all-or-nothing decision, a sensible middle way would be to allow those airports that want to escape from Crown Rent to be converted to investor ownership, with the proceeds going to the feds to compensate them for giving up the next several decades worth of rent. That would create a natural experiment, allowing everyone to see which airports worked better in coming decades.

A line in the White House’s “skinny budget” document in March contained the following sentence: “In addition, the Budget reflects TSA’s decision in the summer of 2016 to eliminate the Behavior Detection Officer program, reassigning all those personnel to front line airport security operations.” Not a word of this had appeared in any of the aviation and security updates I receive each weekday, nor in the various airport and aviation magazines I read.

That same month I attended a social event in Los Angeles and ended up talking with an official of one of the metro area’s airports. I asked him about this, and his answer was quite different. Far from being reassigned, he told me that his airport’s BDOs are still doing randomized interactions with people at the airport, but now their focus is on airport and contractor employees, rather than passengers. This is part of something called TSA Playbook, he said, and it’s a national program operating at most airports with TSA presence.

I went online to see what I could find about this program and discovered that the program is not new. According to a heavily redacted 2012 report from the Center for Evidence-Based Crime Policy at George Mason University, “TSA’s Security Playbook,” the program was begun in December 2008 and involved BDOs from the outset. The report was commissioned by the Department of Homeland Security, at the request of TSA.

The basic idea of Playbook is for BDOs to carry out a series of “plays”—specific activities designed to discover and/or disrupt security breaches. A matrix (Figure 25 of the GMU report) shows how many “plays” that focused on three different objectives (deter offenders, increase guardianship, and reduce vulnerability) and two different locations (employee areas or public areas) were carried out using eight different types of “plays.” Many plays are carried out solely by TSA personnel, but others require cooperation from other entities. Unfortunately for purposes of assessing the effectiveness of the Playbook, virtually all the relevant outcome details are blacked out.

My conclusion is that the BDO program has not been eliminated, contrary to whatever TSA may have led the new White House team to believe. It would appear that the BDOs are the principal staff for the TSA Playbook effort, which might well have been revamped in summer 2016. This looks like a situation that demands a more detailed study by the Government Accountability Office or the DHS Inspector General.

After the successful 40-year lease of the San Juan International Airport in 2013, only one applicant remained in the FAA’s Airport Privatization Pilot Program: Airglades Airport in Florida, whose steps toward getting FAA approval slowly continue. But in recent months, two more applicants have joined the queue. Westchester County Airport (HPN) in New York came first, as I reported previously. And the latest candidate is St. Louis’s Lambert International Airport, whose application was approved last month. Perhaps the US airport privatization tide is beginning to turn.

St. Louis Mayor Lyda Krewson said the U.S. DOT’s announcement that the city’s application had been approved “is a great opportunity to explore a public-private partnership.” Lambert is classed by the FAA as a medium hub, with nearly 14 million passengers in 2016. If the privatization goes through, it would be the largest one to date, with 75% more passengers than San Juan. Since Southwest is by far the largest carrier serving the airport, with American in second place, the 65% airline approval requirement should not be difficult to achieve, assuming the terms of the deal are similar to those approved by airlines at Chicago Midway, San Juan, and in a tentative deal last fall for the Westchester County Airport.

Speaking of Westchester, as I reported last issue, the County Legislature rejected the tentative deal with Oaktree Capital Management that had been negotiated (without competition) by the County Executive. Opting for a competitive process, the Legislature hired Frasca & Associates to develop a competition plan, work out a schedule, and draft a Request for Proposals. The RFP duly appeared early last month, and calls for bidders’ proposals to be submitted by July 14th. The goal is to have the winning bidder selected and the deal negotiated before the end of the year.

The plan by Airglades International Airport, LLC to convert the small Hendry County (FL) Airport into a cargo reliever for Miami International Airport 70 miles to the south has taken several further steps. The Draft Environmental Assessment was recently completed, and was discussed at a public hearing on April 19th. Written comments are due to the County Administrator by May 5th.

Finally, though not related to the FAA Pilot Program, the privately financed passenger terminal for Paine Field north of Seattle continues to make progress. In April, the company that is planning the two-gate terminal—Propeller Airports—reached agreement with an environmental group concerned about the project’s impact on stormwater runoff in Japanese Gulch. The Snohomish County government, which owns the airport, said it is prepared to issue a grading permit for construction once the hearing examiner signs the agreement Propeller reached with the Watershed Council.

In announcing the new ban on laptops and other electronic devices larger than a smartphone in the cabins of planes departing to the United States from 10 airports in the Middle East and North Africa, the Department of Homeland Security cited as its rationale new intelligence information about terrorist bomb-makers who have installed explosives inside the battery compartments of such devices. But this logic is questionable on a number of grounds.

First, why only those 10 airports? Jens Flottau in Aviation Week pointed out that at four of the airports—Abu Dhabi, Doha, Dubai, and Kuwait—U.S. Customs operates preclearance facilities. He also wrote that “Anyone who has ever traveled through Dubai’s airport has witnessed now much investment went into state-of-the-art security equipment and staffing to ensure that international standards are maintained.”

Second, as Flottau and other aviation commentators have pointed out, the ban applies only to nonstop flights from those airports to the United States. This ignores the obvious way to route around the restriction: “The terrorist could simply take a connecting service from, say, Dubai or Cairo via Frankfurt or Milan to the U.S.”

Another major problem is the trade-off between air safety and aviation security that is posed—but not addressed—by this decision. As Alan Levin pointed out in an April 7th Bloomberg article, the laptop ban poses a new risk of fires in the cargo compartments of the affected planes. The Flight Safety Foundation was one of the first to raise this concern, noting that the ban was announced at the same time as international safety agencies are banning bulk shipments of rechargeable lithium-ion batteries in the cargo bays of commercial airliners, since such batteries can catch fire or explode. Cabin crew have been trained to deal with such incidents in the cabin, but the cargo holds are inaccessible during flight. As Levin notes, the FAA has logged 31 cases of such in-cabin battery incidents, and the National Transportation Safety board has investigated three cargo planes that were destroyed by fires “attributed at least in part to lithium batteries.”

In addition, Karen Walker reported in Aviation Daily that the FAA issued a safety bulletin to airlines (but has not released it to the public) in response to the laptops ban, making sure airlines were aware of the increased cargo-hold fire risk in such cases. Similar bulletins from the International Civil Aviation Organization and the European Aviation Safety Agency “were based on language in the original FAA bulletin,” according to an FAA spokesperson.

What DHS should have done is carry out an overall risk assessment, validated by external peer review, assessing the tradeoffs between cargo-hold fires resulting from the ban versus the avoided losses from in-cabin laptop bombs without the 10-airport ban. And if the results looked unfavorable to the ban, the obvious alternative would be to insist on better security at the designated airports.

A few days after ban was announced, the Wall Street Journal‘s Robert Wall and colleagues reported on the number of airline seats to be affected by the ban. The vast majority were for flights to the United States operated by Emirates (from Dubai), Turkish Airlines (from Istanbul), Qatar Airways (from Doha), and Etihad (from Abu Dhabi). A full 86% of all seats were accounted for my just those four airports and the respective airlines. Interestingly, the U.K. adopted a laptops ban along similar lines, but did not include any of those four airports.

As Madhu Unnikrishnan pointed out in Aviation Daily (March 23rd), the U.S. ban could have a chilling effect on business travel via Middle East hubs, and could shift significant travel to European carriers. This is also consistent with the concerted efforts of the three legacy U.S. carriers to reduce competition from Emirates, Etihad, and Qatar. Is this bizarre decision a first step toward an “America first” aviation policy?

There is growing concern among consumer groups and members of Congress about reduced competition among U.S. airlines. Due to mergers over the last decade or so, we now have only four major carriers—American, Delta, Southwest, and United—where there used to be a dozen or so. Airline deregulation was premised on the idea that the airline business is naturally competitive, rather than being a utility that worked best when a government regulator (the now-defunct Civil Aeronautics Board) parceled out routes to just one or two carriers and prevented price competition among them. The result was high fares and limited choices for would-be passengers.

But as the Business Travel Coalition pointed out in a March 3rd Industry Analysis, there are tools at the disposal of U.S. carriers that serve to limit competition in ways that do not serve the best interests of air travelers. Among the anti-competitive tools BTC cited are airlines lobbying against local, self-help airport Passenger Facility Charges (PFCs), incumbent carriers hogging the slots at slot-controlled airports like Reagan National (DCA) and LaGuardia (LGA), and major-carrier attacks on U.S. Open Skies policy. If Congress were serious about removing barriers to airline competition, what policies could our elected representatives support?

First on my list would be to un-cap airport PFCs, a self-help financing mechanism that has been key to numerous capacity expansion projects at airports experiencing growth in recent years. Airlines continue to lobby against any increase in the current federal cap of $4.50 per passenger (unchanged since 2000), and they continue to bamboozle conservative taxpayer groups (Americans for Tax Reform and National Taxpayers Union) into describing these local-self-help fees as onerous taxes. BTC points out the hypocrisy of this approach, contrasting a potential $2 or $3 increase in an airport‘s PFC with the average of $16 in ancillary fees passengers currently pay to airlines.

PFCs were introduced originally to give airports a way to expand capacity that could not be vetoed by incumbent airlines under long-standing “majority-in-interest” clauses in long-term lease agreements that cover the fees paid by airlines to use an airport. MII clauses have long been used by incumbents to veto or reduce in size proposed increases in airport capacity that would permit entry by non-incumbent carriers. Although long-duration use-and-lease agreements between airports and airlines are gradually fading away as they reach the end of their terms, and there is also a trend toward more common-use gates, existing agreements with MII clauses and exclusive-use gates serve as significant barriers to entry—and hence to increased airline competition. Since Congress has no business abrogating existing legal contracts, its best alternative is to support airports’ efforts to increase local self-help PFCs, which are exempt from MII clauses since these are fees paid by passengers to the airport, rather than fees paid by airlines to the airport. And as I’ve reported previously, a growing fraction of conservatives in Congress no longer buy the anti-PFC arguments. A good example is the bill co-sponsored by Reps. Peter DeFazio (D, OR) and Thomas Massie (R, KY) that would eliminate the federal cap on PFCs in exchange for reductions in federal airport grants..

BTC also criticized the practice of incumbent carriers at slot-controlled airports like DCA and LGA “slot-sitting”—i.e., using regional jets to hog slots that could easily handle much larger-capacity planes. In 2016, reports BTC, some 73% of LGA passenger aircraft had 76 or fewer seats, with similar figures at DCA. Current runway pricing practices, in which the only charge is for landing and is based on the plane’s gross weight, in effect subsidizes under-use of a scarce and valuable resource: the right to land or take off at airports for which demand (at current prices) exceeds capacity. A market-based runway pricing system, with prices varying by demand rather than by weight, would encourage airline “up-gauging,” as documented by previous FAA studies and simulation modeling of such pricing for the New York airports by Reason Foundation (http://reason.org/news/show/congestion-pricing-for-the-new). It would be foolish for Congress to mandate such a pricing system, because in doing so it would invariably carve out all kinds of exceptions for favored aviation sectors. But the good news is that the U.S. DOT changed its airport rates and charges policy to permit runway congestion pricing in 2008. The airlines litigated to overturn this change, but lost in court.

No U.S. airport has taken advantage of this opportunity, but where market-based runway pricing has taken hold is at privatized London Gatwick and London Heathrow airports. So in my view, the most likely path toward runway pricing at congested U.S. airports is to allow them to be privatized. Congress has an opportunity this year to liberalize the current obstacle course called the FAA Airport Privatization Pilot Program, opening it up to all U.S. airports without any arbitrary limits and simplifying the current double-super-majority airline approval requirement.

Finally, there are the hard-won Open Skies provisions negotiated by previous Administrations. Contrary to current efforts by the big three legacy carriers to end Open Skies with Qatar and the United Arab Emirates, Congress should resist any such efforts that might be proposed as part of FAA reauthorization. Indeed, airline competition would be enhanced by two policy changes separate from Open Skies. One would be to increase the current 25% limit on foreign ownership of U.S. airlines to at least 49% (as in Europe). Another would be to allow non-US airlines to offer commercial service between two points within the United States, presumably as extensions of current routes to and from U.S. gateways.

The legacy carriers would strongly oppose most or all of what I have suggested here. But the real question for Congress is this: whose interest should you be serving—that of millions of air travelers or that of several major incumbents subject to less and less competition as time goes on?

House Unanimous on Airport Employee Screening. On April 26th, in a unanimous vote, the House passed a bill that would increase vetting and security badge requirements for airport workers and contractors with access to secure areas. Introduced by Rep. John Katko (R, NY), the bill would also require a study on the feasibility and cost of full employee screening at airports. Katko chairs the transportation security subcommittee of the House Homeland Security Committee.

Branson Airport Lands New Airline. Privately developed Branson Airport, in Branson, MO, has had ups and downs in hosting scheduled air-carrier service. In March, the airport announced the arrival of a new low-cost carrier, Via Airlines. The airline flies regional jets, and Branson is its second hub, offering service to Austin, Dallas, Houston, Chicago, and Denver. Via’s eastern hub is at Charlotte, serving destinations in Virginia, West Virginia, and Florida.

Frankfurt Hahn Sold to Chinese Company. The German state of Rhineland-Palatinate has sold its 82.5% stake in Frankfurt Hahn Airport to HNA Airport Group for $15.8 million. The state of Hesse owns the remaining 17.5% of the airport. HNA Group manages 13 airports in China and owns Hainan Airlines there. The primary airline serving the Hahn airport is Ryanair, with 85% of airline service.

TSA Withholds Documents from Whistleblower Agency. The Office of Special Counsel (OSC), an independent federal agency that investigates reports of retaliation against whistleblowers, has been refused access by TSA to various documents it has requested. TSA contends that DHS guidelines allow it to “assert attorney-client privilege in certain cases,” which OSC disputes as illegal, arguing that there is no such privilege when one federal agency investigates another. House Oversight Committee chairman Jason Chaffetz (R, UT) has threatened to subpoena the documents if the agency does not turn them over to OSC.

Santa Rosa (CA) Airport Expanding. Increased airline service between Santa Rosa and larger airports has led to a $20 million plan to more than double the size of the small airport’s terminal. American Airlines began daily service to Phoenix Sky Harbor in February and United is considering resuming daily service to San Francisco, which it last served in 2001. Alaska offers 7 to 9 daily flights, depending on the season. And Allegiant offers weekly service to Las Vegas. As Santa Rosa Airport expands, the San Francisco Bay Area will have four, rather than three air-carrier airports, which will be welcome news for travelers faced with the metro area’s massive traffic congestion.

3-D Scanners Being Tested for Carry-On Luggage. 3-D scanning technology similar to what is already in use at many airports for checked baggage is in the testing process for screening carry-on bags. If it proves to be feasible in high-volume use, the new checkpoint scanners could enable passengers to leave electronic devices, liquids and gels in their carry-on bags, increasing throughput and convenience at checkpoints. Amsterdam Schiphol has moved into a second phase of testing the L3 ClearScan 3-D scanner in one lane at the airport. If it proves itself in high-volume use, the airport plans to start large-scale implementation by the end of the year. Four other companies are developing 3-D checkpoint scanners, and TSA and American Airlines will be testing some of them at major airports this summer.

Brazil Privatizes More Airports. In the latest round of auctions for long-term concessions of Brazilian airports, European companies emerged as winners. Germany’s Fraport won a 30-year concession for Fortaleza Airport ($485 million) and a 25-year concession for Porto Alegre Airport ($123 million). France’s Vinci bid $214 million for a 30-year concession for the Salvador Airport, and Zurich Airport bid $27 million for a 30-year concession for Florianopolis Airport. The winners contractually agreed to invest $2.13 billion in upgrading the four airports over the lifetimes of their concessions.

Bermuda Privately Finances a New Terminal. Canadian company Aecon was the winning bidder to finance, develop, operate, and maintain a new $274 million terminal at Bermuda’s L.F. Wade International Airport. The new terminal will be separate from the existing terminal, allowing the latter to operate unimpeded by the construction. The new entity Bermuda Skyport Corporation Ltd. (wholly owned by Aecon) will manage the entire airport, including the old and new terminals, under a 30-year concession.

TSA Pledges Checkpoint Improvements. Even PreCheck passengers are expressing frustration with long lines at the checkpoint. A survey by OAG of 2,500 PreCheck members found that 45% of them think the PreCheck lines are too long and are not sure five-year membership is worth the $85 price. TSA responded that as of March 2017, membership had doubled from the prior year, going from 2.3 million last March to 4.6 million this March. TSA also announced that it is making permanent its Innovation Task Force, charged with improving the air traveler experience at airports. Near-term ITF priorities are evaluating three different 3-D checkpoint scanners and testing new biometric authentication technologies.

Expand LaGuardia to Rikers Island? An April 9th Associated Press story reported a suggestion from the commission that helped persuade the city government to close the jail complex on Rikers Island (next to LaGuardia Airport): the 400 acre-property could be redeveloped as a new runway and terminal extension for the chronically congested airport. Last year LGA had the highest percentage of late arrivals among the nation’s large-hub airports. The estimated cost of demolishing the jail, cleaning up pollution, and developing the new runway was estimated at a whopping $22 billion. There are also potential airspace conflicts that would have to be worked out. Still, this is the first conceivable proposal ever advanced for adding runway capacity to LGA, and the Global Gateway Alliance is among those cheering for the idea.

Air Marshals Propose a Sensible Reform. While the overall Federal Air Marshal program is largely a waste of money, the TSA office that manages the program last month suggested a sensible reform. Why not coordinate with airlines to ensure that if a flight has an approved armed pilot in the cockpit (under the cost-effective Federal Flight Deck Officer program), then no Federal Air Marshal should be assigned to that flight. This strikes me as a no-brainer, and I’m amazed that it is not already standard practice.

Still No Opening Date for Berlin Brandenburg Airport. The endlessly delayed completion of the massive new airport for Berlin—originally scheduled to open in 2007—is still uncertain. A recent report by consultant Roland Berger estimated a 73% probability that the beleaguered terminal will open by autumn 2018. Meanwhile, the Steigenberger Airport Hotel Berlin, a four-star, 322-room hotel next to the airport completed in 2012, still sits vacant, awaiting the eventual flow of airport customers. Had this project been carried out under a long-term concession (as originally planned), there would have been very powerful financial incentives to correct the construction problems and get the terminal into service.

Atlantic City Outsourcing Screening. Another airport, Atlantic City (ACY), has joined TSA’s Screening Partnership Program, under which a TSA-approved security company will take over the screening functions from TSA. Proposals from screening companies (to TSA) were due April 25th, but so far the agency has disclosed no details, or an expected date for contract award. With around 600,000 annual enplanements, ACY has about half the volume of some of the other SPP participants, such as Orlando Sanford (1.2 million), Sarasota (also 1.2 million), and Key West (761,000).

“Canada is looking at what the next step might be [regarding airport privatization]. Its airports are split on the options. IATA [International Air Transport Association] has no second thoughts. It is against. But with a move with a degree of credibility of -3.5, it also wants the Crown Rents abolished. IATA’s position is crystal clear—it wants to both eat its cake and keep its cake. That is a clear position. Completely untenable, but clear. So, applying these marching orders to the situation of Canadian airport reform, the Canadian government was presented with this demand from IATA’s DG [Director General] Alexandre de Juniac, in Montreal in very late March: the government should not privatize Canada’s airports. Furthermore, it should eliminate the requirement for Crown Rent. This is industrial strength cake having and cake eating.”
—Andrew Charlton, “Canadian Airports and Crown Rents: IATA Does the Snout to Trough Tango,” Aviation Intelligence Reporter, May 2017

“Trump’s budget staffers . . . have ignored an elephantine program, the Federal Air Marshal Service, which provides little security at great cost. . . . The program involves paying people to ride shotgun on airliners to prevent or disrupt hijackings. Even though there are thousands of marshals, there are too few to be on much more than 5% of all flights—though the service still wouldn’t be cost-effective even if that number rose to 20%. The TSA insists marshals are placed on high-risk flights, but since no terrorist has boarded an airliner with hostile intent since 2001, it is difficult to see how that ‘risk’ is determined. . . . We have assessed a policy mix in which the air marshal budget is reduced by 75% (still leaving hundreds around for special assignments), the inexpensive program to train and arm pilots to resist hijackers is doubled, and secondary barriers to the cockpit—easily deployable and stowable—are installed. The result: better aviation security and a savings of hundreds of millions of dollars each year for both taxpayers and the airlines.”
—John Mueller and Mark Stewart, “Trump’s TSA Budget Fails to Cut the Obvious: Air Marshals,” Wired.com, March 20, 2017

“The anxieties raised by various St. Louis stakeholders are reasonable and should be addressed, and the best way to do that is by laying out the rules from the beginning. Neither passengers nor the airlines should pay more as a result of any transaction. The city should be a financial partner in the deal, with its long-term interests aligned with the private operator through an ongoing revenue share. Customer-service levels should go up based on measurable, enforceable operating standards. The successful private manager should have specific requirements and incentives for significant capital investment in the airport and ancillary economic development. Overall, the transaction should be perceived as a win for the city, the community, the airport, and the airlines.”
—Stephen Goldsmith, Harvard Kennedy School, “How Public-Private Partnerships Can Unlock the Value of an Airport,” Governing, April 4, 2017

Only a few days after my last issue reached you, with its lead article decrying the chaos that erupted last year at JFK and LAX over imagined shootings, an actual shooting spree took place in the baggage claim area of Terminal 2 at Fort Lauderdale International Airport (FLL). In response to social-media alarums that led to false reports of shootings in the other terminals, the FAA ordered a ground stop, closing the airport for the afternoon and evening, disrupting thousands of people’s travel plans and playing havoc with airline schedules.

Ironically, the day before the FLL debacle, I’d received a long email from the director of a southeastern airport, chiding me for misrepresenting the situation. He noted that FAA requires airport operators to maintain an Airport Emergency Manual and requires emergency drills. In addition, TSA requires airport operators to have an Airport Security Program, which delineates the roles of all agencies involved in responding to security incidents. Therefore, in effect, he was saying, JFK and LAX were anomalies, and such situations would not catch most airports unawares.

Well, in light of FLL, I beg to differ. The only significant difference at FLL was that there was an actual shooter, with five killed and six injured. But otherwise, the panic and chaos were the same. People in other FLL terminals, learning of the Terminal 2 shooting via social media, insisted that they, too, heard shots, leading to panic and hordes of people fleeing onto the tarmac and out past the TSA checkpoints. Incoming flights were forced to wait on the tarmac for hours, and outgoing flights were prevented from taking off. Nobody seemed to be in charge, despite the provisions of FAA-required Airport Emergency Manual, required drills, and the airport’s TSA Airport Security Program.

Whatever exists in those documents is evidently not adequate to deal with imaginary shootings and the mass panic spread by social media. Outgoing Homeland Security Secretary Jeh Johnson called for airports to establish “Airport Operations Centers” staffed by airport operators and security, local law enforcement, the airlines, plus TSA and CBP “to manage security, incident response, as well as day-to-day airport operations.” It’s not clear what all those people would do the vast majority of the time, and assembling them all in one place immediately after a report of gunfire seems problematic. But some kind of central monitoring and decision-making facility seems wise for coping with serious emergencies. Here are some ideas worth considering.

First, ensure that video surveillance covers all portions of every terminal, with all video displayed in that central location, staffed with responsible parties able to make and announce decisions during all hours of airport operation.

Second, make it possible for audio announcements to be directed to any specific terminal, lobby, or baggage area from that central location, capable of over-riding any other audio announcements, so that passengers and others can get accurate, real-time information about security situations.

Consider installing gunfire detectors in terminals and other areas, able to distinguish the sound of gunfire from other loud noises, specifying the gunfire’s actual location. Such detectors are in use in high-crime neighborhoods in a number of U.S. cities.

These changes would help, but there is still the problematic role of social media in spreading rumors and engendering mass panic. Social media is not going away, and therefore must be factored into future planning for security and other emergency situations. The airport community needs to think hard about how best to limit the damage this generally benign technology can cause.

President Donald Trump is given to exaggeration when he disparages U.S. airports as of Third-World caliber. Nevertheless, when Skytrax released its 2016 list of the World’s Top Airports, only 13 U.S. airports made the list; the top 37 were all in other countries. New York’s Kennedy International made the list at #59, but LaGuardia and Newark were nowhere to be seen.

New York Times science columnist John Tierney wrote a searing critique of the five New York airports (including Atlantic City and Stewart) managed by the Port Authority of New York & New Jersey. “Making New York’s Airports Great Again” is one of the best airport articles I’ve ever read. It documents how treating the three major airports as a cash cow for money-losing real estate and seaport projects has left air travelers with three of the least-liked airports in the country. (Read Tierney’s article here.)

Tierney contrasts the century-old Progressive Era model of a centralized public authority with the global trend of airport privatization and public-private partnerships. These commercial entities have figured out that the way to make money is to focus on pleasing passengers (as well as airlines). He also notes with admiration that the British government, which originally privatized the three major London airports as a shared monopoly, corrected its mistake by requiring BAA to divest Gatwick and Stansted, putting all three into competition to attract and keep customers.

He also concluded that “The Port Authority has diverted so much money from the airports and run up such massive debts on its other projects that it can’t afford the bill for LaGuardia’s renovation,” which is being financed partly by Delta and partly by a competitively selected consortium that will build and operate the new central terminal.

The only U.S. airport I know of that was worse than LaGuardia or Newark was San Juan International. As Tierney points out,

“Until four years ago [that airport] had lots in common with LaGuardia. It was run by an unwieldy bureaucracy, the Puerto Rico Ports Authority, which neglected the airport while running up bills on its other unprofitable projects in the island’s ports. The terminal was a confusing jumble of dim corridors, with passengers enduring long waits to get through security or pick up luggage. The stores were tacky and the restaurants greasy spoons, often rented at bargains to politicians’ friends or relatives.”

He goes on to cite specific examples of lack of maintenance and broken toilets. But this problem really caught my eye:

“Some crucial tasks didn’t get done at all, such as maintaining the instrument landing system [ILS] . . . . For years, pilots had to land their planes visually, without positional guidance from radio signals, because the system’s antennae were blocked by trees—and no one in the bureaucracy wanted to take responsibility for cutting them down. Airlines, unsurprisingly, switched operations to other Caribbean hubs, leaving the airport without the revenue to pay bills, much less make capital improvements.”

But the airport situation got so bad that the administration of Gov. Luis Fortuno decided to seek an outside operator under a 40-year lease, a design-build-finance-operate-maintain (DBFOM) public-private partnership. The winning bidder was a consortium of financial firm Aerostar and a company that operates a number of privatized airports in Mexico. They agreed to pay the government $600 million up-front and another $600 million over the course of the lease. They also agreed to limits on airline landing fees, which won the support of the airlines serving the airport.

Here’s how Tierney describes the results, after three years of commercial operation and management:

“The redesigned concourses are sleek and airy and easy to navigate. Passengers get through security faster, thanks to a state-of-the-art system for screening bags. New boarding bridges stand at the gates The duty-free shop now looks like an upscale department store, and revenue from the new stores and restaurants has more than doubled. The renovated facilities and reduced landing fees have attracted more airlines to San Juan, and they have no trouble getting access to gates—now controlled by the airport’s manager, not other airlines.”

Tierney also explains how the new company handled the inoperative ILS. New airport director Augustin Arellano, an engineer with decades of aviation experience, explained that airport officials had been waiting eight years for bureaucrats in Puerto Rico and Washington to decide which agency had the authority to cut down the trees. Augustin’s response: “We went out there and cut down the trees ourselves. I knew we’d have to pay a fine, and we did—they made us plant two trees nearby for each one we cut down. But we couldn’t wait any longer. We had to make sure planes could land safety. Isn’t human life more important than trees?”

Tierney ends his article by citing the recommendation I made in a January study on reinventing the Port Authority of New York & New Jersey for the 21st century, commissioned by the Manhattan Institute. (Read the study here.) I urged that the various profitable PA facilities, including the three major airports, be long-term leased under the kind of public-private partnership that has transformed San Juan International. Using data on recent airport sales and long-term leases worldwide in recent years, I estimated that the three could be worth as much as $35 billion. But to ensure that the airports are refocused on pleasing their customers, I called for them to be leased separately, so they would be free to compete with one another for airlines and passengers, as is the case in London, Los Angeles, Miami, and a number of other major metro areas.

Note: To its credit, in recent weeks the Port Authority has announced a new capital budget devoting additional resources to Kennedy and Newark airports, with LaGuardia-like terminal renovations envisioned under similar public-private partnership arrangements. But the airports would still be operated as a shared monopoly, and would continue to divert airport revenue to the PA’s coffers for non-airport purposes.

The nominal subject of the Department of Homeland Security Inspector General Report OIG-17-14, dated Dec. 30, 2016, was audits of security controls for TSA information technology systems at airports. And most of the report is pretty boring stuff, though alarming in the number of instances of deficiencies at various airports.

But what stood out for me was Inspector General John Roth’s cover memo to then-TSA Administrator Peter Neffenger. It sharply criticized TSA for requiring that bits and pieces of the information in various tables be blacked out—or in security-speak, redacted. Roth laid it on the line: “The redactions are unjustifiable and redact information that had been publicly disclosed in previous Office of Inspector General reports”. He followed this with six examples of airport-specific deficiencies that had been reported in previous audits of individual airports but were all of a sudden supposed to be treated as Sensitive Security Information (SSI).

After citing these examples, Roth wrote that “I can only conclude that TSA is abusing its stewardship of the SSI program. None of these redactions will make us safer and simply highlight the inconsistent and arbitrary nature of decisions that TSA makes regarding SSI information. This episode is more evidence that TSA cannot be trusted to administer the program in a reasonable manner.”

Roth’s memo goes on to note that the House Committee on Oversight and Government Reform issued a bipartisan staff report in 2014 “finding that TSA had engaged in a pattern of improperly designating certain information as SSI in order to avoid public release because of agency embarrassment and hostility to Congressional oversight.” He added that in summer 2016, Chairman Katko of the transportation security subcommittee of the House Committee on Homeland Security, stated that this problem (of over-use of SSI designations) “raised the specter that we’ve heard again and again about TSA conveniently using the security classifications to avoid having public discussions about certain things that may be unpleasant for them to discuss in public.”

And that is not the end of the story. Roth also noted that at the request of three House committee and subcommittee chairs, the Inspector General’s office has begun a review of TSA’s management and use of the SSI designation, which they expect to release by summer 2017. I’ll be following this with great interest.

In last year’s effort to reauthorize the Federal Aviation Administration, ACI North America and AAAE made a strong case for either increasing or eliminating the federal cap on the Passenger Facility Charge (PFC)—the local user fee that an airport can levy for specific improvements to that airport. In the end, Congress punted on that proposal and on the House Transportation & Infrastructure Committee’s proposed reform of the FAA’s Air Traffic Organization. Congress ended up passing an extension of existing law good through Sept. 30, 2017.

Several things have changed since then, which appear to increase the odds for more-substantive change when Congress returns to FAA reauthorization this year. First, we have a new President Trump who has pointed out that U.S. airports, in general, do not measure up to their global counterparts. He and his team have stressed the need for greater investments in sub-par U.S. infrastructure—but not via large-scale increases in federal spending. Granting airports increased ability for self-help investments is consistent with those concerns.

Second, as was already evident last year, the long-term campaign waged by airlines to persuade conservatives in Congress that any increase in the PFC cap would be a “federal tax increase on passengers” has lost most of its credibility. A growing number of conservative and libertarian groups have come to see the PFC as a local user charge (which it is), not a federal tax (which it is not). They also appreciate the opportunity to reduce the size of the tax-funded Airport Improvement Program (AIP) by allowing large and medium airports to replace AIP funding with locally generated revenues.

Third, a liberalized PFC cap has the potential to be that rare phenomenon in 2017—a bipartisan reform. Senate Democrats have included airport infrastructure in their notional plan for a 10-year, $1 trillion infrastructure improvement effort. So far, that plan offers no clues as to where the funding would come from. But on the House side, Rep. Peter DeFazio (D, OR), Ranking Member of the House T&I Committee, included increasing the PFC cap from $4.50 to $8.50 in his Feb. 1, 2017 “Investing in America: Options for an Infrastructure Package.” His news release suggested that the increased revenue would allow larger airports to self-fund, while permitting more AIP funding to be directed to smaller airports.

Finally, in crafting a transformative FAA reauthorization, there is at least the possibility of an airline/airport rapprochement. Airlines are committed to transforming the Air Traffic Organization into a self-supporting nonprofit corporation, governed by aviation stakeholders. But they are fighting against opponents’ portraying this as an attempt by the big airlines to gain control of the ATC system. They need a broader, more-representative set of governing stakeholders, and airports would be a strong and logical addition to the stakeholder group. Thus far, airport groups have been non-committal on ATC reform. A plausible political compromise would be an ATC corporation board seat nominated by airport groups that would join the coalition working for ATC reform—and airlines giving in on a DeFazio-type PFC increase.

I’ve been highly critical of TSA’s long-running program of having some 3,000 “behavior detection officers” roaming around airports, stopping and interviewing people who exhibit any of a memorized list of suspicious behaviors. I’ve noted a lack of any scientific evidence that such superficial interviewing could reliably detect those who pose a threat to aviation, and have cited reports by the Government Accountability Office that found zero potential terrorists among the thousands of people the BDOs have referred to law-enforcement officers for further questioning.

Now comes further evidence against the program, courtesy of the American Civil Liberties Union. In June 2015, the ACLU filed a lawsuit against TSA under the Freedom of Information Act, seeking release of records and reports about the behavior detection program. ACLU eventually won, obtaining over 12,000 pages from TSA. Last month the organization released a 28-page report on its findings here.

They found that TSA’s own files include many scientific papers questioning the validity of brief interviews for spotting potential terrorists. ACLU’s Hugh Handeyside told USA Today that “There is no indication—at least according to what the TSA has in its own files—that this kind of program can be done in a reliable and scientifically valid way in an airport context.” Further review of the TSA document trove also revealed:

TSA repeatedly overstated the scientific validity of its behavior detection activities in communicating with Congress and GAO.

Materials in TSA files “raise further questions about anti-Muslim bias and the origins and focus of the TSA’s behavior detection program.”

TSA’s documents “reveal details of specific instances of racial or religious profiling that the TSA concealed from the public.”

As GAO discovered, during 2011 and 2012 the BDOs referred 8,700 people at 49 airports to law enforcement officers. Of those people, only 365 resulted in arrests, not a single one for anything related to terrorism. And the records on referrals to law enforcement were sloppy and incomplete, according to a review by the DHS Inspector General.

The ACLU report recommends that Congress terminate the behavior detection program, as the Ranking Member of the House Homeland Security Committee, Rep. Bennie Thompson (D, MS) has long recommended. I concur, and point out that shifting those 3,000 BDOs back to normal checkpoint screening duties would go a long way toward resolving the ongoing shortage of screeners.

On January 28, 2017, the FAA reached an agreement with the City of Santa Monica, CA that calls for shutting down the airport (SMO) on December 21, 2028. It also allows the city to begin work immediately on reducing the SMO runway’s length from the current 4,973 ft. to just 3,500 ft. That will make it unusable by most of the business jets that now use the airport.

The City of Santa Monica has been trying for decades to close down the airport (on whose non-aviation property Reason Foundation’s first LA-area offices were located from 1986 through 1991). Many of its voters object to aircraft noise, especially from jets, and worry about crashes. Voters in 2014 approved a ballot measure that retained the City Council’s right to control airport land; it also prohibited new development on airport land without voter approval, except for parks, public recreation, and open space.

The 72-page settlement agreement sets a troubling precedent, and many in aviation are wondering why FAA Administrator Michael Huerta agreed to it. The federal government owned the airport during World War II, when it was the site of the main production facility for Douglas Aircraft. It turned over the airport to the City via a 1948 agreement. That document reserved the authority for the FAA to take over the airport if the City mismanaged or closed it. While FAA has not owned or operated any airports since the divestiture of Washington Dulles and National Airports in 1987, were it to exercise this option per the 1948 transfer agreement, it would have no trouble finding firms interested in operating the airport under management contract or long-time lease. So why give up this legal authority to save the airport, in what Huerta called “a fair resolution for all concerned”?

General aviation groups have been scrutinizing the settlement agreement, to see if there are any grounds for litigation to prevent it from being implemented. They had better act quickly. City Manager Rick Cole has already begun the selection process for a firm to design the shortened runway.

Westchester County Hires Privatization Consultant . Unhappy with the County Executive’s plan for sole-source privatization of the Westchester County Airport, the County Legislature has hired Frasca & Associates to devise and manage a competitive process for the airport’s privatization. The Frasca firm has worked on both previous privatizations that have taken place under the federal Airport Privatization Pilot Program—Stewart International (New York) and San Juan International (Puerto Rico).

Port Authority Seeking Rail Access for LaGuardia and Newark. The Port Authority of New York & New Jersey last month approved a $32.2 billion capital budget that includes long-discussed plans to extend rail transit to LGA and EWR. The PA has issued an RFP for preliminary planning and engineering work for a new Air Train link between the existing subway system and LaGuardia, with two station stops within the revamped LGA and a new AirTrain station at Willets Point. The concept for Newark is to extend the PA’s existing PATH train to that airport.

Florida Governor Supports Airglades Airport Plan. Florida Governor Rick Scott on January 30th sent a letter to Customs & Border Protection urging the agency to approve a forthcoming application from the Airglades Airport in Hendry County to be designated a “user fee airport,” under which the airport itself would pay for CPB services. Airglades holds one of the slots in the federal Airport Privatization Pilot Program.

O’Hare Expansion Could Mean Increased Airline Competition. The City of Chicago has a plan to add 25% to the number of gates at ORD, and Chicago Business columnist Joe Cahill suggests the City use this opportunity to permit new entrants. In a February 1st column, he points out the current lease for anchor tenants American and United (which account for 82% of ORD traffic) expires in 2018 after 30 years. The current, old-style lease, permits AA and UA to veto airport expansion projects that threaten their dominance. Cahill urges the City to adopt a newer-type lease agreement without such a clause, and to make the new gates common-use.

Norwegian Adds Service to Under-Used Northeastern Airports. Norwegian Air International, which recently received its foreign air carrier permit from U.S. DOT, has announced it will launch 10 new transatlantic routes using long-range 737 MAX aircraft. Among the first routes will be service from Edinburgh, Scotland to Stewart International in New York, Green Airport near Providence, RI, and Bradley International serving Hartford, CT. Additional service to Stewart and Green will link them to Belfast, Northern Ireland and to Dublin and Shannon, Ireland starting in July.

Will Kansas Build a Rival Airport to KCI?. Plans to replace Kansas City International’s inefficient three-terminal configuration with a single modern terminal have faced local opposition. So Kansas Gov. Sam Brownback has begun discussions about possibly upgrading one of the two Johnson County airports to a full-fledged commercial airport with a state-of-the-art terminal. Whether this is just a bargaining chip or a serious plan remains to be seen. The larger of the two is New Century AirCenter, a former naval air station, with a 7,300 ft. main runway and a 5,000 ft. crosswind runway.

TSA to Reduce PreCheck Access for Non-Members. In a welcome development for PreCheck members, TSA announced on January 30th that it will cut way back on letting Behavior Detection Officers shift passengers who appear to be low-risk from the regular lines to PreCheck, which often slows down the PreCheck lanes due to the new people being unfamiliar with the streamlined procedures in those lanes.

More Airports Adopting Common Use Technology. The February/March issue of Airport Business reports on upgrades taking place at Phoenix and Salt Lake City airports. As part of its Terminal 3 Modernization Program, Phoenix Sky Harbor is adding common-use technology in the ticketing area and at gates. Salt Lake City’s $2.9 billion replacement for its existing terminal is doing likewise. The common-use technology will allow any airline to use any ticket counter and any gate, an important point for longer-term flexibility (and increased airline competition).

Amazon Putting $1.5 Billion Cargo Hub at CVG. Amazon is increasingly moving to take control of package delivery, emulating services offered by Fedex and UPS. In addition to last year’s lease contract for 40 jet freighters, last month it announced a project to build and operate a cargo hub at Cincinnati/Northern Kentucky Airport (CVG). The project will add about 2,000 permanent jobs at the facility. Amazon announced that the “Prime Air hub at CVG will support Amazon’s dedicated fleet of Prime Air cargo planes by loading, unloading, and sorting packages.”

Frankfurt Hahn Airport Sale May Succeed, on Second Try. Owned by the city government of Hahn, Germany, the money-losing Frankfurt Hahn airport serves mostly Ryanair flights. Last year the City proposed selling 82.5% to a Chinese firm, but the deal fell through when the company failed to make an initial payment. But in January, Infrastructure Investor reported that a different Chinese company, HNA Group, teamed with local firm ADC, is expected to bid on the airport.

TSA Says 25 Airlines Now in PreCheck. A news release from TSA in January announced that Spirit Airlines is now participating in the PreCheck program, like just about all other U.S. carriers. Less well-known is the recent addition of selected non-US airlines, including Aeromexico, Air Canada, Aruba Airlines, Avianca, Emirates, Etihad, Lufthansa, Sunwing Airlines, Virgin Atlantic, and WestJet.

Delta Remains at Dallas Love Field. The long-running battle between Delta and Southwest airlines over whether Delta can continue to use a gate at Love Field resulted in another short-term victory for Delta last month, when judges on the Fifth Circuit Court of Appeals voted to uphold a District Court injunction that prevents Southwest from kicking out Delta while the case moves to trial at the District Court level.

Express Train from Paris to Charles de Gaulle Airport Approved. The French parliament in January voted to approve plans for the CDG Express project, which will link the airport with the Gare de L’Est station offering nonstop rides of just 20 minutes. The budget for the project is $1.77 billion, and the schedule calls for it to be open by 2023. One-way fare is projected to be about $25.

UK’s Stansted Airport Arrivals Building. Privatized London Stansted Airport has announced plans for a new $162 million arrivals building to keep pace with its growth as an international airport primarily serving low-cost carriers. Under the plan, the current terminal would be devoted to departures only. The airport currently serves 24 million passengers per year, but projects growth to 43 million a year, the limit of its current single runway.

Flytenow Loses Appeal to Supreme Court. Flight-sharing company Flytenow appealed to the U.S. Supreme Court a lower-court ruling upholding FAA’s denial of its right to offer website-based flight opportunities on general aviation planes. But in January, the Supreme Court declined to accept the case.

“The glaring problem today is that TSA writes the screening procedures, and then monitors itself for compliance. Not exactly a virtuous circle. The current paradigm discourages critical thinking, solving problems with outside-the-box thinking, and calling it like it is when critical functions are reviewed. That’s why news reports indicate TSA failed 95% of the time during Red Team tests in June 2015, plain and simple. Any other excuse you’ve heard is a symptom, not the disease. The virtuous circle of quality control and quality assurance starts with moving screening operations out of TSA.”
—Ken Dunlap, “Towards TSA 2.0, Part 1: Remove Airport Screening Functions,” SecurityDebrief.com, July 12, 2016

“Between them, United and American control 82% of O’Hare traffic. Underlying that enormous market share are exclusive rights to 89% of 168 domestic gates. Only 10 ‘common-use’ gates are open to all carriers. . . . [UA and AA] also wield an effective veto over major projects at O’Hare, which are funded in large part by landing fees collected from airlines. As a result, many such projects require their approval. That means the two can shoot down projects they don’t like. And they don’t like projects that would open up more gates to new competitors. Remember the proposed western terminal? United and American didn’t want it, so it never was built and isn’t likely to happen any time soon. Of course, there’s an element of fairness in giving the companies that would pay for a project some say in whether it goes forward or not. But there’s no fairness in allowing two companies to freeze out competition.”
—Joe Cahill, “This Is Chicago’s Once-In-a-Generation Chance at O’Hare,” Chicago Business, Feb. 1, 2016

“Naturally, [TSA] officials vow it’s been worth it to pump over a billion dollars into an undertaking that includes officers monitoring people who seem ‘off,’ because stopping terrorism requires a variety of different approaches. But the execution doesn’t measure up to the concept. Allegations and anecdotes of racial and ethnic profiling have multiplied, but a lack of records has made investigation impossible. And those who don’t belong to singled-out minority groups have their own reasons to disapprove of weakly accountable secret snoopers with no track record of stopping attacks. There’s got to be a better way. Americans have largely lost patience with wasteful and invasive ineptitude from inside the Beltway, no matter how well-intentioned or initially reasonable on paper. If the TSA doesn’t want Congress to consider shuttering the behavior detection program, it had better find a way to make its operations more transparent, more cost-effective, and more in tune with Americans’ basic expectations around civil liberties and political accountability. Otherwise, the whole agency could find itself on the chopping block.”
—Editorial Board, “TSA’s Behavior Detection Program a Wasteful Flop,” Orange County Register, Feb. 14, 2017

Back in August, panic broke out at JFK International Airport, leading to mass chaos in several terminals as social media spread false reports of an active-shooter situation. Only a week later, a similar episode took place at LAX, also spreading to multiple terminals. In late November, the report of a joint investigation of the JFK debacle by federal and New York State officials cited “a failure of bureaucracy, where the lack of clear lines of authority and poor communication” led to JFK Airport grinding to a halt.

The New York Times article on the report of the “JFK International Airport Multi-Agency Security Review Team” pointed out that there were no plans in place for orderly evacuation of terminals in the event of a security incident. There are separate video surveillance systems, operated by different entities (including airlines), which are not centrally monitored so that authorities can figure out what is happening where. And a plethora of agencies with security and/or law enforcement responsibilities have no overall coordination when a serious incident occurs. At JFK they included:

Port Authority Police

New York Police Department

National Guard

TSA security officers

Customs & Border Protection officers.

As reporter Barbara Peterson put it, in a piece for CNTraveler.com, “A major problem facing airport security is the post-9/11 patchwork of different agencies that are involved in keeping airports safe. While all airports are required by the FAA to perform emergency drills, TSA—which is nominally in charge of security—is limited to the checkpoint area, although it does perform spot checks of airport employees in other areas.”

This problem stems from the flawed organizational structure mandated in the hastily-passed 2001 legislation that created TSA. Instead of creating a serious regulator and policy-maker for transportation security (as the original House bill had intended), it created a bizarre combination of regulator and service provider, which essentially self-regulates the provision of airport screening. The unintended consequence is fragmented airport security, in which TSA runs screening but the airport is responsible for everything else—with no one entity responsible for the overall security of the entire airport.

While sweeping reform of TSA’s flawed structure has seemed beyond the scope of what Congress might take on, the November election might have changed things. In his acceptance speech at the Republican convention, Donald Trump promised to “fix TSA at the airports, which is a total disaster.” That statement appears to have encouraged Rep. Mike Rogers (R, AL) to announce plans for legislation that would “allow airports to end the federal screening workforce, replacing them with qualified private contractors. This will allow TSA to work directly with its stakeholders on technology and information-sharing, while being focused on the real threats to our transportation systems.”

A long article in the Boston Globe (December 8th) by reporter Neil Swidey, while praising TSA Administrator Peter Neffenger for improving operations during his recent tenure, also highlighted Rogers’ ideas for reform. Rogers told Swidey that outsourcing airport screening (as is common in Europe and Canada) “will be my number-one priority in the next Congress on the Homeland Security Committee.”

And rather than parroting TSA union misrepresentations that outsourcing means “returning” to the low-wage rent-a-guards of the pre-9/11 era, Swidey educated his readers as follows:

“It’s important to note what Rogers means by privatizing [screening]. He does not want to dismantle the entire agency and put screening responsibility back in the hands of individual airports and airlines. Having different standards at 440 airports around the country, he admits, is a non-starter in a post-9/11 world. What he wants to do is to turn over many of the roughly 47,000 TSO screener jobs to private contractors while keeping in place the TSA oversight bureaucracy.”

In other words, Rogers is proposing to end fragmented airport security and to remove the conflict of interest between service provision and regulation that Congress built into TSA at its creation. This will be a major battle, but if the new President supports it, the odds of success will be much greater than zero.

Former TSA Administrator Kip Hawley created quite a stir with a recent op-ed in the Los Angeles Times titled “The Scary Truth About TSA’s PreCheck Security Vulnerabilities.” Hawley, who opposed any and all trusted traveler concepts while in office, wrote that PreCheck’s “vulnerabilities represent a clear and present danger that demands urgent attention.”

Hawley faults the enrollment process as unable to fully verify an applicant’s identity, claims that terrorists will recruit people with clean records for aviation terrorism, and faults faster PreCheck lanes for creating over-crowding in the regular lanes. Noted security expert Bruce Schneier wrote a blog post in response, first stating that he himself had pointed out the same problems as early as 2004—but ended up with very different policy recommendations. I think both are overly critical of PreCheck, but Schneier has a more realistic approach regarding PreCheck’s future.

Here’s my take on this controversy. First, Hawley in particular stresses that it is probably impossible to screen out 100% of potential bad guys who seek to enroll in PreCheck. That’s probably true, but if you insist that any security system achieve 100% protection, you are engaged in a fool’s errand. Benefit/cost analysis (such as that carried out for PreCheck by analysts John Mueller and Mark Stewart in June 2016 for Newcastle University) compares benefits received by millions of air travelers against probabilistic costs of terrorists outfoxing the system. That’s the only sensible way to assess such a program, and it is only in the post-Hawley era that TSA and parent DHS seem to be acting on such assessments.

Schneier does suggest ways of further reducing the already low probability of terrorists getting past PreCheck. One way would be to “scrub PreCheck enrollees for false identities.” As he notes, that could be done by using commercial databases. That was the basic idea of the now-cancelled third-party recruitment program, under which big data firms developed algorithms that TSA tested by giving the firms a large database of potential enrollees seeded with questionable people. I’m told that some of these algorithms passed muster with TSA, but as I and others have reported, protests and a lawsuit by current monopoly TSA recruitment contractor Morpho Trust led to cancellation of the third-party program before any contracts could be awarded.

Rather than abolishing PreCheck, in a subsequent blog post Hawley suggests increasing the use of conventional screening techniques in PreCheck lanes, presumably on a random basis—such as K-9 teams, behavior-detection officers, explosive trace detection swabs, and body scanners. Some of this might be justified, but how much should be the subject of further benefit/cost analysis.

Reviewing these further thoughts from Hawley, Schneier concludes that our experience with PreCheck thus far tells us that “basically, there are no terrorists” seeking to board U.S. airliners. And hence he proposes that “Instead of screening PreCheck passengers more, we should screen everybody else less.” I think that goes too far, but I also think TSA is on the right track in seeking to get many more frequent flyers into the program, reserving “regular” screening for those who travel infrequently and those about whom much less is known than those who pass the enrollment hurdles for PreCheck.

In a surprise announcement on November 3rd, the county executive of New York’s Westchester County announced an agreement with Oaktree Capital Management to lease the Westchester County Airport in White Plains for 40 years, under the FAA Airport Privatization Pilot Program. The two-runway airport handles 1.75 million annual passengers, with the large majority flying on American, JetBlue, and United Airlines. The County filed a preliminary application with the FAA the next day, and the FAA approved it early in December.

County Executive Rob Astorino had hoped to get quick approval of the deal from the county’s Board of Legislators in order to use a down payment on the deal to plug a revenue hole in its 2017 budget. But legislators expressed interest in seeking competing bids in order to maximize proceeds to the County, so the process will end up taking longer.

The proposed lease strongly resembles the 2013 deal that has transformed the San Juan International Airport in Puerto Rico. Oaktree (formerly Highstar) is a principal in the San Juan lease, and both American and JetBlue are major airlines serving that airport. For the Westchester lease, the company has already obtained approvals from all three major airlines. And, under the terms of the Pilot Program, that means lease proceeds can be used by the County for general government purposes. Net payments to the County are estimated at $140 million, with $130 million paid up-front and the balance paid out over the course of the lease. Oaktree has also committed to investing at least $30 million in capital improvements at the airport during the first five years, including a redesign of passenger boarding areas, improving airport parking, and upgrading concessions and restaurants.

Currently, the only other applicant in the Pilot Program is Airglades Airport in Hendry County, FL. The plan calls for converting this general aviation airport into a cargo reliever for Miami International Airport, 80 miles to the south. AIA, the company that seeks to privatize the airport, is already under contract to manage the facility, and the privatization plan has strong support from the County government. In a November presentation to the County Commission, AIA President Fred Ford reported that the FAA-required environmental analysis is nearing completion, preliminary construction plans are being drawn up, and site preparation is scheduled to begin in April.

Since shifting air travelers from time-consuming regular screening to much faster PreCheck screening saves TSA money and (ideally) reduces waiting-in-line time for all travelers, it makes sense that the agency continues working toward a goal of having 25 million members in PreCheck and other trusted traveler programs like Global Entry by 2019. But in the meantime, TSA continues to select non-members, on the day of their flight, based on a superficial review of the information in their passenger name record, for moving through the PreCheck lanes. Not only is this less safe than letting only fully-vetted travelers in, it also leads to inexperienced people slowing down the PreCheck lane by taking off their shoes, removing their coats, etc.

Some claims are now being made that the $85 fee for enrollment (which pays for fingerprinting and the background check) is deterring people from joining. A study released last month by University of Illinois researchers attempted to make a case that TSA should make PreCheck enrollment free of charge from now on, for high-volume travelers. Doing that, they claimed, would achieve the 25 million target and save the agency $459 million per year thanks to faster screening. The foregone revenue would be $425 million, so TSA would almost break even.

But now let’s look more closely at the numbers. The researchers’ calculations were based on giving free membership only to frequent flyers, defined as those making at least 6 round-trips per year (i.e., 12 screenings per year). But do the math: someone flying at that rate would encounter 60 screenings over the five-year membership period. Divide the $85 fee by 60 screenings and you get $1.42 per screening. That’s supposed be an obstacle to signing up? And for people like me who make about 25 round-trips a year, $85 divided by 125 screenings is 68 cents per screening. The time savings and avoided hassle are worth far more than 68 cents to me each time I use PreCheck.

The real barrier to much larger enrollment is not the $85 fee; it’s the hassle of making an appointment and going to get fingerprinted. Avoiding that was one of the aims of big-data companies hoping to get contracts under TSA’s now-abandoned third-party recruitment effort. The idea was that algorithms relying on big data would be subjected to TSA testing to screen out higher-risk applicants, and those that passed would not have to be fingerprinted. According to a Bloomberg article by Justin Bachman (November 30th), “TSA plans a fresh effort next year to secure new PreCheck vendors—and probably hopes it doesn’t draw a legal challenge like the now-defunct RFP did.” That was the procurement that was torpedoed by litigation filed by the sole PreCheck enrollment contractor.

Bachman also pointed out that some companies, on their own, are holding large-scale employee PreCheck enrollment events, and some of them are paying their employees’ enrollment fees. That’s fine to generate interest, but the employees still have to trek to an approved location to have Morpho Trust take their fingerprints and send them in.

Consolidation among major airlines has led to reductions in scheduled service at medium and smaller airports. A study by MIT’s International Center of Air Transportation found that between 2007 and 2014, medium and smaller hubs lost nearly 27% of their scheduled departures. And the smaller airports in rural areas are hurting even worse, as pilot shortages at regional airlines lead to fewer daily flights and in some cases elimination of service altogether. In addition, people living in former large-hub cities, who used to have numerous nonstop destinations, now have to plan on longer trips through a larger hub, which may double the total trip time.

Stepping into this breach are a growing number of start-up air services, with an array of business models. Some have already failed, while others are growing their fleets and raising additional investment capital. A previous revolution—fractional ownership shares in turboprops and business jets—began in the 1980s, typified by market leader NetJets, which today counts as the country’s fifth-largest operator (by number of planes), with 700 planes in its hangars. But a number of other fractionals went belly-up thanks to the Great Recession.

A second generation approach is membership services, which market primarily to frequent business travelers, offering them nonstop service and fewer hassles for a monthly fee. They generally use business aviation terminals when they operate at major airports, but many operate from secondary airports. One of the largest of these is Jet Smarter, based in Ft. Lauderdale, which claims over 6,700 members. It operates scheduled shuttles on a growing number of U.S. and overseas routes, as well as offering empty-leg seats on business jets. Former Homeland Security Secretary Tom Ridge joined its board last March.

Another growing membership company is New York-based Wheels Up, with 4,000 members and a fleet of 55 turboprop King Airs and a dozen Cessna Citation jets. Other membership companies include Surf Air, offering flights between Southern and Northern California cities in Pilatus PC-12 turboprops; Rise Air offering flights from Dallas Love Field to Austin, Houston, and Midland; and MySky linking Jacksonville, FL with Atlanta and Charlotte.

Two other companies are focused on former hub cities that now lack many nonstop services. OneJet offers nonstop service in 6-7-passenger jets from former US Airways hub Pittsburgh to Cincinnati, Hartford, Indianapolis, Louisville, and Milwaukee, so far, and is starting a comparable service based in Louisville. Ultimate Air Shuttle is based at former Delta hub Cincinnati and uses 30-seat regional jets to serve Charlotte, Chicago, Cleveland, and New York so far.

Another business model is offered by JetSuiteX, offering scheduled flights as a public charter service using business jets and smaller regional jets. It currently serves six California cities (including Burbank, Santa Monica, and San Jose) plus Las Vegas and Bozeman, MT. There are also new attempts at fractional ownership, such as PlaneSense and Executive Air Share.

But the saddest case is a would-be “Uber for planes” called Flytenow. There is a long-established practice of private plane owners posting on airport bulletin boards that they have an empty seat on a planned flight and would be happy to share the flight with someone willing to pay a pro-rata share of the direct operating costs. The FAA has long approved this practice. But when Flytenow’s founders decided to assist pilots by posting such requests online (remember when online platforms were called “bulletin board systems”?), the FAA cracked down, making their business model illegal. In an interview of the company’s founders by Jared Meyer, the founders pointed out that this kind of online flight sharing is legal in Europe. (https://fee.org/articles/how-the-faa-brought-down-uber-for-planes) Two companies similar to Flytenow currently operate within the European Union, with the blessing of the European Aviation Safety Agency. The Goldwater Institute has challenged the court decision that sided with the FAA (Flytenow vs. FAA) and is seeking Supreme Court review.

US Airports Rated; New York’s Score Worst. Travel publication The Points Guy in November released a comparative ranking of the 30 busiest U.S. airports, quantifying things such as flight delays and cancellations, security wait times, travel time from the city center, food options, free wi-fi, etc. The bottom three were LaGuardia, JFK, and Newark, with other low-scorers including Chicago O’Hare, Detroit Metro, Washington Dulles, and LAX. The top-rated airports were Phoenix, Portland (OR), San Diego, Salt Lake City, and Honolulu.

French Airport Privatizations Reach Financial Close. Atlantia and EDF Invest completed their acquisition of the French government’s 65% ownership stake in the airports of Nice-Cote d’Azur (Nice, Cannes, and St Tropez), for $1.4 billion. And sale of the 60% stake in two Lyon airports, by Vinci, Caisse des Depots, and Predica, has also been completed, for $592 million.

Ontario (CA) Reclaims Ownership of Its Airport. At the beginning of November, the recently formed Ontario International Airport Authority took ownership of the Ontario Airport, previously owned and operated by Los Angeles World Airports. The move became official after the authority paid off $55 million in bonds that had been issued by LAWA for airport improvements, and the FAA granted an operating certificate to the authority. The agency hopes that by cutting operating costs and marketing the airport more effectively, it can regain traffic levels that it has not seen in nearly a decade.

Greece Gets Only One Bidder for New Airport Project. Only the single consortium of GMR Airports and GEK Termina ended up bidding for a 35-year concession to design, finance, build, and operate the New Heraklion International Airport in Crete. The project includes the airport itself plus an 18 km. motorway to serve the new facility.

Voters Approve New Terminal for Burbank. In the November election, local voters approved Measure B in Burbank by a two to one margin. That clears the way for the Burbank-Glendale-Pasadena Airport Authority to build a replacement for the antiquated 14-gate terminal at the airport. The old terminal is too close to the main runway to meet FAA standards, but it has taken 29 years to bring about consensus on its replacement.

New Airport Development in Atlanta?. The Atlanta Journal Constitution has reported a project planned by UPS adjacent to a local airport known as Charlie Brown Field. The company has applied for a permit to develop a 159-acre distribution center on Fulton Industrial Blvd. adjacent to the airport (which is also known as Fulton County Airport). It would include over 1,000 truck trailer spaces and parking for over 1,300 employee cars. The airport’s main runway is just under 5,800 feet, long enough for some of UPS’s cargo aircraft.

Heathrow’s New Runway Will Take Years. Despite the green light from the U.K. government in October, final approval of the third runway at London Heathrow is not yet in hand. Heathrow Airport must now go through community consultations in order to prepare its planning application, which it plans to submit in 2019. While that is going on, the airport has selected seven companies that will comprise its Integrated Design Team for the new runway.

Australian Government OK’s Second Sydney Airport. In December the government announced its approval of a $3.7 billion second airport to serve metropolitan Sydney. It will be located at Badgery’s Creek in the far western suburbs. Under the terms of the long-term lease of the existing airport, Sydney Airport has the right of first refusal to build the new project, or to invest in it. The airport company has four months to decide how to respond.

An Updated Case for Privatizing U.S. Airports. Chris Edwards and I have co-authored a new policy paper for the Cato Institute, making the case for airports to become ordinary businesses funded by their customers. The paper includes some little-known history of pre-World War II airports that were developed and operated by the private sector. “Privatizing U.S. Airports” is available at https://www.cato.org/blog/airport-plan-trump-administration-1.

New Berlin Airport Still Has No Opening Date. The project to create the Berlin Brandenburg International Airport was originally intended as a long-term concession, but ideological opposition led to a conventional government procurement. Construction began in 2006, with the grand opening planned for October 2011. Delay after delay ensued, and in December officials announced that the project was finally 80% completed, but they are still unable to announce an opening date. The new airport is being constructed on the site of the former East German Schoenefeld Airport, which is still in operation amidst ongoing renovations.

Bulgarian Airport Privatization Delayed. The election of a pro-Russia prime minister in November has cast doubt on the planned 35-year concession to redevelop the Sofia Airport. The government had announced procurement plans back in May, and a number of teams were preparing proposals. The airport is one of the last significant state-owned enterprises in Bulgaria.

Heritage Foundation Proposes Sweeping Aviation Policy Changes. In a Backgrounder study released on November 23rd, Michael Sargent of the Heritage Foundation calls for repeal of the 1973 Anti-Head Tax Act and elimination of the federal cap on Passenger Facility Charges. In addition, the paper calls for eliminating the passenger ticket tax and the Airport Improvement Program of federal airport grants, which is unlikely to get very far in Congress. The paper also calls for eliminating the grandfathered exemption to airport grant agreements under which a handful of airport operators, such as the Port Authority of New York and New Jersey, are allowed to divert airport revenues to non-airport uses such as local transit subsidies. The paper is online at: http://report.heritage.org/bg3170.

Vladivostok Airport Privatized. Russia’s far eastern airport Vladivostok International has been purchased by a joint venture of Singapore’s Changi Airports International, Basic Element, and the Russian Direct Investment Fund. The previous owner was Sheremetyevo International Airport.

Peotone Airport “Still Alive”. In November, the Illinois Department of Transportation confirmed that it has acquired all but three parcels of the land needed for the long-planned third Chicago airport near the town of Peotone, south of Chicago. IDOT officials told a quarterly meeting of the Chicago Southland Economic Development Corporation that the project is still alive, and they still hope to develop it as a public-private partnership.

“It has become increasingly clear that the Transportation Security Administration, at the very least, should consider a name change. Specifically, the ‘security’ part again proves to not apply. . . . For a federal agency with as many problems handling its basic responsibilities as TSA, it almost goes without saying that it was caught unaware by these missing badges. In fact, it had asserted to Homeland Security investigators that all was well. As NBC 5’s Scott Freeman reported, the Homeland Security investigators offered guidance that roughly amounts to inspect more and do a better job of it. You could pardon the investigators for skepticism, given TSA’s track record of failing on 67 of 70 individual tests for contraband weapons in 2015. Or allowing 75 airport workers with ‘links to terrorism’ to gain access to sensitive areas of airports. Or interminable security lines that sometimes cause travelers to miss flights. Or wasting money on ‘high-tech’ screening machines that then do not work. This is what travelers—who tend to be air travelers—are getting for $7.6 billion a year, which is TSA’s budget. Congress appropriates that money and has oversight responsibilities, but tends toward the reactive when TSA problems crop up. At some point, the agency or lawmakers had better get proactive. American lives depend on it.”
—Editorial, “Missing Badges Just One More Security Horror for Beleaguered TSA,” Dallas Morning News, Nov. 4, 2016

After years of study and political wrangling, the U.K. government last week announced its decision that the much-needed expansion of airport capacity in Southeast England will take place at Heathrow, the country’s largest and busiest airport. The decision was widely expected, given that the government-appointed Airports Commission last year had basically concluded that there would be greater benefit from adding a runway at Heathrow than from adding one at Gatwick—even though the projected cost of the latter was about half the projected $19 billion cost of the Heathrow expansion.

Heathrow is the major hub of formerly state-owned British Airways, and Willie Walsh, CEO of BA parent company International Airlines Group, earlier this year spoke forcefully against the costly runway addition (the cancellation of which would serve to limit future competition with BA at Heathrow). But Walsh seemed comfortable with the government’s announcement, based on an apparent pledge that Heathrow airline charges would not be allowed to increase significantly. And there is still some question as to how much of the $19 billion Heathrow will pay and how much British taxpayers will be charged for ancillary infrastructure such as building a tunnel to shift the M25 motorway underneath the new runway. By contrast, Gatwick Airport has repeatedly stated that it would pay the full cost of its far-less-costly runway addition.

Despite the media hoopla, Heathrow’s new runway is far from a done deal. The government’s next step is a “public consultation” next year, leading up to a final vote by Parliament in the winter of 2017-18. And very likely there will be lawsuits, from local residents whose villages will be acquired (at 125% of market value) for the runway and from various environmental groups that object to any expansion of aviation, period.

The question that must be asked is this: Why is it the U.K. government’s job to dictate which of the three major London airports can add a runway? In the old days, when the British Airports Authority was the owner/operator of Heathrow, Gatwick, and Stansted, the BAA operated as a central planner—allocating a particular type of operation to each of its three airports, with the ability to use excess revenues from one of them to subsidize operations of the others.

This kind of central planning was supposedly discontinued when BAA was privatized by the Thatcher government in 1987. But because that government unwisely privatized the whole shared monopoly as a single company, the central planning mentality continued to some extent. It is only in recent years, with the divestiture of Gatwick and Stansted as separate, independent businesses, that the days of central planning are (at least) officially over. The new model is supposed to be vigorous competition among the three airports—not a centrally managed master plan.

Yet that central planning mindset—to discover and prescribe the “one best way” forward for airport capacity—was the underlying premise of the Airport Commission from day one. The only voice raised against this premise during the past two years was maverick Michael O’Leary, CEO of hugely successful Ryanair. He repeated his critique right up until the government announced its decision last week. At a press conference on September 1st, O’Leary said, “Instead of picking just one, Ryanair is calling [on] Prime Minister Theresa May to approve three new runways—one each at Heathrow, Gatwick, and Stansted—which will finally resolve the runway capacity issue for the next 50 years.”

O’Leary’s point was that these airport businesses are supposed to be in competition to deliver cost-effective facilities for their customers. If the government gave them each permission, “Heathrow will cry like a baby, Gatwick will cry like a baby, and Stansted will probably be the first to start. Then Heathrow and Gatwick will follow, because they would not want traffic to go to another airport. Competition between the airports will keep the cost of those runways down.”

There is one caveat to this scenario, and it’s a big one. The government does have a role to play in defining the noise exposure standard that runway additions must meet. But if that were defined in performance terms, it would be up to each airport company to come up with a mix of soundproofing, buy-outs and relocations, and airport operating restrictions sufficient to reach a cost-effective solution.

This may sound utopian, but I was pleased to see that my favorite news magazine seconded the motion. In its October 15, 2016 issue, The Economist wrote the following:

“Yet even after the bulldozers get going on Heathrow’s new landing strip, the government should leave the door open for other airports, including Gatwick and Stansted, to build new runways. Demand for air passenger travel is growing far faster than Sir Howard’s forecast, says Nick Dunn, Gatwick’s chief financial officer. This year Gatwick will handle as many passengers as the Airport Commission predicted it would in 2034. A new runway is already needed if it is to increase its capacity at peak times. The airport’s owners want to press ahead with one even if Heathrow gets the nod. It would be no bad thing for Heathrow to face the added competition.”

Around the country, the Federal Aviation Administration is implementing its Metroplex program, applying some of its NextGen air traffic technology and procedures to simplify arrival and departure routes. The goal is shorter and more-precise flight tracks, along with low-power “continuous descent approaches,” to reduce fuel consumption, engine emissions, and noise impact. In a macro sense, all those things are achievable. But as communities around the country are discovering, more-precise flight tracks concentrate the noise impact over fewer properties. This reduces noise for many people, but can significantly increase it for those who live or work under the new flight tracks. The intent certainly is to have far more winners (less noise) than losers (more noise). But since the losers are the ones complaining, the public and their elected representatives hear mostly that there is now a worse noise problem than before.

And that disparate impact is being exaggerated further by a phenomenon documented by two researchers at the Mercatus Center at George Mason University in Virginia. In “Airport Noise and NIMBYism,” Eli Dourado and Raymond Russell analyzed the noise complaints logged by citizens at nine major U.S. airports. In nearly every case they found that a handful of people were responsible for huge fractions of total complaints. Some examples:

Reagan National Airport (DCA): two people at one residence in Northwest Washington logged 78% of the 8,760 complaints in 2015.

Las Vegas McCarren (LAS): one individual accounted for 98% of the 1,223 noise calls in September 2015.

Seattle-Tacoma (SEA): Three people logged 64% of the complaints, and one of those alone accounted for 42%.

Los Angeles International (LAX): One person accounted for 50% of the calls, and the top three callers placed 88% of the June 2015 total.

And some of them were people located a long way from the airport in question:

Denver International (DEN): One person in Strasburg, Co—30 miles from DEN—accounted for 73% of the calls, and the top four added up to 95% of the 4,870 complaints.

Washington Dulles (IAD): One person in Poolesville, MD—13 miles from IAD—made 84% of the 1,223 noise complaints.

San Francisco (SFO): 53 residents of Portola Valley, about 25 miles from SFO, made 25,259 complaints in October 2015, an average of 477 calls per person that month.

And this is not a totally undiscovered phenomenon. Two years ago, Chicago Tribune reporter Stacy St. Clair wrote “Confessions of O’Hare’s Record Noise Complainer,” documenting the case of Dawne Morong who often filed a hundred noise complaints per day, and alone accounted for one-third of all O’Hare noise complaints in August 2014.

I’m glad to see such excesses being documented, and hope that airports suffering noise complaints will henceforth analyze their data more carefully before being bamboozled by exaggerated claims of horrible noise. But that is not to minimize the genuine adverse impact when the peace and quiet of a neighborhood is shattered by a change in flight patterns that brings a substantial increase in noise that is beyond accepted standards. Those are not cases of “you knew the airport was there when you moved in”—because in these cases, the noise moved in on them after they were already there. People such as these are being genuinely harmed, and deserve compensation—whether it’s major sound-proofing, buyout and relocation, or a monthly noise compensation payment. For airports, such compensation should be a normal cost of doing business.

Canada’s relatively new Liberal government continues to advance its “asset recycling” agenda, under which it would privatize major state-owned assets and enterprises and use the proceeds for investing in infrastructure. On airports specifically, in October the government announced a contract under which investment bank Credit Suisse will review and assess the airport privatization options, studying each of the eight largest airports individually, and report back to Finance Minister Bill Morneau by year-end.

But the airport privatization effort thus far has the support of only one of the eight nonprofit airport authorities—Aeroports de Montreal. The CEOs of three others—Calgary, Ottawa, and Vancouver—have published op-ed pieces largely defending the status quo, as has the president of the Canadian Airports Council. What can we make of these conflicting claims?

It’s clearly the case that the transfer of control of the 22 largest commercial airports from the federal government to newly created local airport authorities in the early 1990s led to improved airports (just as the transfer of Reagan National and Dulles International from our federal government to the newly created Metropolitan Washington Airports Authority in 1987 did). Canada’s commercial airports were largely freed from politicized governance, and they gained the ability to charge passengers an Airport Improvement Fee whose revenue stream can be bonded (like PFCs in the United States). Using their new freedoms, the airports expanded and improved their facilities and began modernizing their retail concessions.

However, all Canada’s commercial airports resent having to pay annual rent to the federal government (which retains ownership of each airport) based on a percentage of gross airport revenue. Since 1992, the airports have paid over C$5 billion in rent to the government, far in excess of the book value of the assets they manage. And that de-facto tax will continue for all the remaining years of the 60-year leases. For years the airports have been citing this tax as one reason why many Canadians cross the border to fly out of nearby U.S. airports instead.

Privatizing the airports, using any of the several models in widespread use around the world, offers one way to terminate that rent. Indeed, if the airports were either sold outright (as in most European privatizations) or leased under long-term concession agreements, the feds would typically get a one-time lump sum in exchange, and each airport company would begin to operate as a normal commercial business. No longer having the rent expense would cut their operating budgets significantly—rents in 2015 accounted for 33% of the operating expenses at Calgary, 31% at Toronto, 28% at Vancouver, and 27% at Montreal.

The status-quo airports reply that there is no free lunch. The cost of financing the acquisition price would still have to be paid by airport users, which is certainly true. But there is also significant potential for increasing airport revenues to do that. A pro-forma produced by the Calgary Airport assumes no changes in commercial revenue (parking, rental car, food & beverage, and other retail)—a highly questionable assumption given the transformation of airport retail under way worldwide, led by privatized airports. The dissenting airports cite large percentage increases in such revenues since the 1992 transfer, yet a pie chart of annual revenue for the eight large airports as of 2015 shows commercial revenue at just 33% of total—far below the global trend for first-world airports.

Another bald assertion made by privatization opponents is that “privatization would almost certainly have to be accompanied by flat-out economic regulation.” They dismiss with little discussion the “light-handed regulation” that has worked well in Australia since all its major airports were privatized via long-term lease concessions. Positing a cumbersome utility regulatory body creates an easy target, but one that is hardly a given, since we have functioning examples of the alternative in Australia. There is also the example of concession-based limits on rates charged to airlines, as in the long-term lease agreement for the San Juan International airport (which is strangely absent from the Canadian discussion to date). Airlines serving San Juan seem very pleased with the major improvements to the terminals and security facilities since that airport was privatized.

In short, Canada’s eight major commercial airports would likely be improved by privatization, especially if that change of status liberated them from the open-ended, ever-higher annual rent payments to their federal government. Airport companies, airlines, infrastructure investment funds, and pension funds will follow the Canadian debate with interest in coming months.

TSA dodged a bullet over the summer, with much shorter lines over the July 4th weekend than the horrendous mess of screening during Spring Break. This was due to the combined efforts of TSA itself (with some one-time budget help from Congress), airports, and airlines. Congress allowed TSA to shift $62 million into screening for the summer, allowing it to hire and train 1,368 new screeners and convert 1,865 part-timers to full-time. Airlines detailed about 600 employees to help out at checkpoints, and airports provided about 350 full-time-equivalents. All of this helped, but these were all one-time fixes, not built into ongoing budgets of TSA, airlines, or airports. As we near the Thanksgiving and Christmas holiday travel season (with a record 27.3 million passengers expected at airports for the Thanksgiving holiday), it’s unclear how many of these checkpoint people will still be available.

Congressional appropriators have proposed adding $73 million to TSA’s FY 2017 budget, but as yet there are no appropriations for this fiscal year, which began on October 1st. TSA Administrator Peter Neffenger is pushing for a budget increase, as is DHS Secretary Jeh Johnson. They may get it, but since the shape of the new Congress and Administration are unknown as I write this, nobody can be sure.

Two policy changes that could have made a difference for 2017 look doubtful at this juncture. One is the major expansion of PreCheck, which TSA had been counting on to shift a much larger fraction of daily travelers into the faster PreCheck lanes, thereby reducing the lines and waiting time in the regular lanes. That major increase was premised on the eventual success of the agency’s long-planned (but frequently challenged) third-party recruitment effort. The planned 2016 procurement was put on hold last spring due to a lawsuit filed by TSA’s monopoly contractor for PreCheck signups, Morpho Trust. Alas, on October 26th, TSA abruptly cancelled the procurement, citing “concerns about the ability to ensure vendors properly safeguard testing data in light of increased and evolving cybersecurity risk over the past year.” So the time and money spent over the last three years by would-be providers are all down the drain. Needless to say, the next day Morpho withdrew its lawsuit, and it continues to add sign-up locations via additions to its contract with TSA.

The other policy change that should be pursued, regardless of any budget increases, is the sensible proposal from Rep. Bennie Thompson (D, MS). His bill calls for TSA to convert its 2,800 Behavior Detection Officers (most of them former screeners) into regular checkpoint screeners. The BDOs have never intercepted a would-be terrorist, and the scientific validity of their supposed surveillance of passengers has never been demonstrated. This example of TSA mission creep could be easily undone by Congress—and should be.

Last winter Salt Lake City International launched a major change in its aircraft de-icing program. As Airport Business reported (October 2016), SLC made two big changes simultaneously: shifting from terminal-area de-icing to end-of-runway de-icing and shifting from airline-controlled de-icing pads to common-use pads.

I’ve written previously about the gradual change to common-use facilities at U.S. airports. We increasingly see common-use check-in kiosks in ticket lobbies, common-use arrival and departure display boards, and common-use gate equipment (in which the name and logo of the airline appear only electronically, rather than on fixed signage). Common-use facilities reduce unit costs and enable the airport to serve more flights and passengers with a given amount of facilities. Common-use is a near-universal practice overseas at corporatized and privatized airports, and it continues to make headway in this country.

In addition to gaining economies of scale with common-use de-icing, SLC aimed to reduce delays in getting flights de-iced and into the air. At some airports during busy peak times that involve long taxi-out delays, planes sometimes wait so long in line to take off that they have to return to the terminal to be de-iced a second time. Hence, the advantage of having de-icing pads near each of an airport’s runway ends. Since SLC has three runways, the plan calls for six such pads, one near each runway end. Last winter the program began with three pads, and a fourth is due to open this fall.

Last winter’s start-up of runway-end de-icing went pretty well, as related by Airport Business‘s article. One deviation from the original plan was that anchor tenant Delta (for which SLC is a major hub) decided not to participate in common use, though it agreed to shift to the runway-end location. Hence the program began with Delta operating one pad and the other airlines using the others managed by SLC’s Integrated Deicing Service. And that ended up causing a problem, when peak-period DL flights queuing up on a taxiway blocked other aircraft from getting to the common pads. A policy change has been worked out for this winter under which DL will hold planes short of the de-icing pad to prevent blocking the taxiway.

To the best of my knowledge, SLC is the first airport to attempt both common-use and end-of-runway de-icing. The idea appears sound, and the first winter’s results look promising.

Airfares Are Lowest Since 2009. Despite political and consumer-advocate rhetoric to the contrary, airline ticket prices have declined significantly since 2009, and are 10% lower than a year ago. That’s the word from the U.S. DOT, reporting on the April-June 2016 quarter at the end of October. The average domestic airfare that quarter was $353, which was the lowest (inflation-adjusted) fare since the third quarter of 2009. Fuel prices have dropped over 50% since 2014, and competition from ultra-low-cost carriers like Allegiant, Frontier, and Spirit has helped keep fares low.

Brazil Plans Third Round of Airport Privatization. The reformist interim government plans to privatize four more airports within the next year: Florianopolis, Fortaleza, Porto Alegre, and Salvador. This time around, the state airport authority, Infraero, will not retain a 49% ownership stake in the concessions. There will also be no restrictions on foreign ownership, reports Airports International (October 2016). An experienced airport operator must make up at least 15% of the consortium bidding for an airport. Concession holders will pay an annual fixed fee and a percentage of gross airport revenue each year for the full term of the concession. The proceeds will be used to assist development of Brazil’s smaller airports.

Denver OKs P3 Developer Negotiations. The Denver City Council voted 10-2 to authorize Denver International Airport to negotiate the details of a public-private partnership led by Ferrovial Airports aimed at a major revamp of its Jeppeson Terminal. The project will consolidate airline ticket counters, redesign and relocate the TSA checkpoint screening, revamp the checked-baggage system, and redesign the retail shopping areas. The Council also approved hiring the Nossaman law firm as DEN’s legal advisor on the P3 agreement.

JetBlue to Bring New Competition to Atlanta. Delta’s fortress hub at Atlanta’s Hartsfield-Jackson International Airport will see new competition next year when JetBlue returns to ATL in force. In March it will offer five daily round trips to Boston, and will follow those with daily trips to New York’s JFK, Orlando, and Fort Lauderdale. JetBlue had briefly served ATL 13 years ago when it was much smaller and financially weaker. Today it is far better able to compete vigorously with Delta.

San Jose Beefs Up Leaky Perimeter. After the embarrassment of a number of highly-publicized intrusions onto its airfield in recent years, San Jose International Airport in September announced the completion of an improved perimeter fence. Replacing the former six-foot chain link fence is a new 10-foot fence topped with razor wire, with 11-foot sections in “key areas.” The airport is also looking into adding increased video surveillance and motion sensors for the airport perimeter.

Santiago Airport Revamp Reaches Financial Close. The $900 million project to add a new international terminal to the airport of Santiago, Chile achieved financial close at the end of July. The financing included both dollar-denominated and peso-denominated loans from a series of international banks. The consortium that will finance, build, and operate the terminal and manage the rest of the airport consists of Aeroports de Paris, Vinci Airports, and Astaldi.

More Air Marshals Arrested than They Themselves Arrest. A long article on the 15th anniversary of the 9/11 attack by McClatchy reporter Tim Johnson cast a skeptical eye on many aspects of TSA-provided aviation security. Among the interesting facts revealed in the article is that air marshals were arrested 148 times from 2002 through 2012 for various crimes unrelated to their work (revealed thanks to a Freedom of Information Act request by ProPublica). Johnson contrasted this with findings by Rep. John Duncan (R, TN) that air marshals had made an average of 4.2 arrests per year from 2001 to 2010, about which Duncan said “We are spending $200 million per arrest.”

GMR Wins Concession for New Goa Airport. GMR Airports was the winner in a competition for a $700 million, 40-year concession to finance, develop, and operate a new airport—Mopa Greenfield—in North Goa on India’s west coast. Parent company GMR Group owns and operates the airports of New Delhi and Hyderabad and has overseas airport projects in Turkey and the Philippines.

TSA Airport Background Check Missed Killer. All employees of companies working at airports who need access to secure areas must pass a 10-year criminal history background check to be granted a badge they must wear to enter the defined security identification display area (SIDA) of the airport. That definitely applies to catering company staff who bring food and beverage supplies to aircraft at the gate. Unfortunately, an employee of LSG Sky Chefs at Detroit Metro Airport, who had served 16 years in prison for the murder of his first wife, passed the background check. The case came to light in September when the man called 9/11 to report that he had just killed his second wife’s two children. In defending its background check, TSA told the Detroit News reporter that “they look for convictions on various offenses within 10 years of an individual’s application date for a SIDA badge.” Since the man had been released in 2008 after serving 16 years, the 10-year look-back did not show any convictions.

Atlantia Gains Stake in Five Italian Airports. Atlantia, the owner of Italy’s largest toll road network (Autostrade per l’Italia), has purchased a 21.3% stake in SAVE, the concessionaire for four Italian airports (Venice, Treviso, Brescia, and Verona) and Brussels South Charleroi. SAVE was first listed on the Italian stock market in 2005. Atlantia is part of a consortium (with EDF) that won the competition for Nice Airport in France.

Casino Planned for Bradley International in Connecticut. The Connecticut Airport Authority was revealed (in August) to have plans for an on-airport casino of up to 200,000 square feet, doubling the size of the on-airport Sheraton Hotel. The project is estimated to cost $500 million, in addition to the cost of a new Terminal B nearby. MGM Resorts International, which plans to open a $950 million casino resort across the border in Springfield, MA in 2018, has been critical of the airport casino plan.

NextGen for Airports, Volume 2. The National Academy of Sciences has released NextGen for Airports, Volume 2: Engaging Airport Stakeholders: Guidebook. In addition to explaining the implications for airports of the many technological and procedural improvements being implemented by the Federal Aviation Administration’s NextGen air traffic control modernization program, the guidebook focuses on how airports can work with their stakeholders to take full advantage of these improvements. The pdf of this guidebook is available at: http://nap.edu/23684.

“Congress’ haste [in 2001] produced a flawed measure. Air travel security has certainly improved, but problems with wait times, screening lapses, and turnover at the top have been too common. The biggest mistake: TSA handles evaluations of its own performance. This is contrary to both common sense and the recommendations of the International Civil Aviation organization, an agency of the United Nations. Now, with the 15th anniversary of 9/11 drawing near and reports of TSA-related delay problems still persistently in the news, it’s time for lawmakers to begin seriously considering an agency overhaul. We’ve waited long enough.”
—Editorial, “Why Wait Longer to Fix TSA? After 15 Years, It’s Time,” San Diego Union-Tribune, Aug. 5, 2016

“About 450 airports worldwide have been privatized to some degree, including some of the world’s best. Yet privatization has lagged in the U.S. The process is inhibited by the financial benefits that still accrue to public airports, such as the ability to issue tax-exempt bonds. Making things worse, since 2000 Congress has capped the Passenger Facility Charge that airports can use to pay for upgrades. . . Congress could encourage [public-private partnership] projects by offering tax preferences for bonds issued by airport investors. It could also increase the Passenger Facility Charge, or at least index it to inflation.”
—Adam Minter, “What Will It Take to Make U.S. Airports More Competitive?” Skift.com, October 5, 2016

“Buried beneath diplomatic niceties in a paper submitted by ACI Global on behalf of airports [is a proposed] changing of the guard in the relationship between airlines and airports. The airports want to change, ever so slightly, the way slots are allocated. The airports would like ICAO to acknowledge that the airports be involved in the process. . . . The ACI request is very modest. It is nothing more than a request for a toothless tiger’s endorsement of a suggestion they be involved. It is not demanding primary markets for slot allocation; it is not demanding ownership of the slots by the entity that actually makes the slots. It simply notes that times have changed.”
—Andrew Charlton, “Airports: Slotting into the New World Order,” Aviation Intelligence Reporter, October 2016

August is normally a month when people go on vacation and don’t pay much attention to public policy issues. But on the subject of reforming the U.S. ATC system, August saw two mainstream periodicals bring the reform case to ordinary thinking people. And they were followed up by more strong statements from aviation professionals.

Leading the general media effort was a long feature article in Popular Mechanics, “How to Fix Flying,” part 1 of which was Chris Clarke’s “Out of Air Traffic Control.” The thrust of the piece was the truthful statement that “American air traffic control no longer has the most modern equipment, the most efficient aircraft routings, or the best technology.” In solid journalistic fashion, Clarke dinged FAA for still relying on paper flight strips, voice radio, and 1950s-era radar and Instrument Landing Systems while just about everyone in the country uses GPS for navigation. He quoted one controller as lamenting, “Paper strips, pre-Commodore flight data input/output, landline communication from around the Apollo program era [at] one of the busiest approach controls in the world. . . . This is what relying on Congress for funding does.” Clarke ends up noting the global, ICAO-blessed practice of separating air safety regulation from ATC service provision, consolidating facilities (since “there’s no reason air traffic could not be managed from anywhere”), and noting the Shuster bill ATC corporation that was approved by the House Transportation & Infrastructure Committee in February.

One week later, The Economist‘s “Difference Engine” blog carried a strong piece headlined “Antiquated Air Traffic Control Systems Are Becoming a Serious Threat to Safety: America Could Learn a Few Things from Canada.” This article reviewed the global trend of countries corporatizing their ATC systems, making them self-supporting from service charges, like other utilities (and also having access to the bond market for major modernization projects). The article repeatedly contrasted the modernizations already implemented by nonprofit corporation Nav Canada with FAA’s slow and painful progress under the rubric of NextGen.

In the third week of August, Airport News featured an article by former editor Joseph Alba, “Why Is the Leading Technological Country in the World Unable to Install a National Air Traffic Control System?” It covered much the same ground as the first two, but was addressed to a more aviation-knowledgeable audience. After discussing the success of Nav Canada in delivering electronic flight strips, controller-pilot datalink, and (soon to come) global ADS-B services via Aireon, he noted the support of the controllers’ union for a corporatized system, adding that “Moving the operation to a corporation that would draw the revenue from user fees would free it from dependence on the instabilities of Congress.”

Finally, Aviation Daily reported, during the last week of August, the presentation by NATCA President Paul Rinaldi at the Air Line Pilots Association Air Safety Forum that week. Rinaldi pointed out that despite FAA having implemented the costly ERAM system at all 20 en-route centers, “We still have to do 2.4 million manual handoffs a year with Canada”—essentially a phone call, whereas Nav Canada has the technology to do automated digital handoffs. “They’re just waiting on us,” Rinaldi said. He also said he finds it “kind of mind-boggling” that, unlike Nav Canada and numerous other ANSPs, the FAA is neither investing in nor subscribing to the forthcoming global space-based ADS-B service being offered by Aireon. “We need to assure a dedicated funding stream” for ATC, he told the ALPA attendees. “When you look at what most of the other civilized countries have done, they have pulled out the [ATC organization from government control] and they’re thriving. . . . If we stay in status quo, we’re going to struggle in the future.”

Here are a few brief notes to amplify what these people have conveyed.

Aviation Week reported in mid-August that FAA has finally selected a contractor for the Terminal Flight Data Manager (TDFM) system that will bring electronic flight strips to all its ATC facilities. How soon? Well, the contract is 12 years long.

Professional Pilot‘s August issue included an article on FAA’s progress with controller-pilot data link. Installation is under way on a single function—pre-departure clearance—at up to 35 airport towers by the end of 2016, with installations at other airports stretched out over many years. A chart in the article shows that initial en-route data link functions will begin to be implemented in 2019, but full en-route services won’t start implementation until 2022.

Earlier this year the ranking Democrats on the House Transportation & Infrastructure Committee and its Aviation Subcommittee—Rep. Peter DeFazio (D, OR) and Rick Larsen (D, OR)—requested the Government Accountability Office to review “potential air traffic control restructuring issues.” GAO’s relatively brief report (GAO-16-386R) does a pretty good job of identifying and discussing the principal topics that must be addressed in serious restructuring, such as taking the Air Traffic Organization (ATO) out of FAA and setting it up as a self-supporting air navigation service provider (ANSP), as nearly all other developed countries have done. This is especially true of the discussions on asset valuation and on human capital and employee transitions.

There are portions of other sections that would benefit from additional information, or a somewhat different emphasis. For example, the discussion of FAA’s budget is somewhat misleading. A statement in the text on p. 3 says that the percentage of FAA’s Operations budget (85% of which is ATO operations) coming from user taxes (the Aviation Trust Fund) has averaged 60% over the years, with the balance coming from the general fund. This wrongly implies that a general-fund subsidy might be needed if the ATO were made separate. In fact, when I created a hypothetical self-funded ATO budget using numbers from the FY 2016 FAA budget, it looks like this:

:

ATO operations

$7.5033

billion

NextGen operations/planning

.0601

Finance & management

.7605

ATC facilities & equipment

1.8322

F&E mission support

.2257

F&E personnel & related

.4700

Total Independent ATO

$11.3927

billion

The remaining FAA includes all safety regulation, research & development, miscellaneous functions such as commercial space transportation, etc., totaling $1.538 billion. Finally, the Airport Improvement Program, also funded by the Trust Fund, is $3.350 billion. On the revenue side, user taxes from the Trust Fund totaled $14.293 billion, and the general fund provided $1.9877 billion (12.2% of the total FAA budget). Therefore, if $11.4 billion of current user taxes were replaced by new ATC fees and charges, the independent ATO would be fully funded at its current level. That would leave nearly enough in residual aviation user taxes to fund AIP at its current level. And the $1.5 billion in general fund revenue would more than cover FAA’s regulatory and miscellaneous functions. None of this context is explained in the GAO report.

The report’s discussion of fixed versus variable costs (p. 4) is presented as if it were something new and unique to air traffic control, but exactly the same issues are faced in other public utilities (electricity, telecommunications, railroads), and solutions such as Ramsey pricing have long since been adopted to ensure that user revenues are sufficient to fully fund capital and operating costs. This discussion should have provided that context.

In discussing ATC user fees (p. 5), the report blandly states that “non-commercial GA flights often use minimal ATC services and it may be difficult to track their use.” This would be a good place to explain how Nav Canada has dealt with this, by charging piston GA planes a very modest annual registration fee rather than any transaction-based charges. But the term “non-commercial GA flights” also includes corporate jets, which use all the same ATC services as commercial airliners—and this point is ignored in the draft’s discussion.

The section on mitigating economic and financial risks notes the one-time steps taken by NATS in the UK to cope with the post-9/11 downturn in air traffic and revenue, but ignores the far more important ongoing solution adopted by Nav Canada: a reserve fund, in which money is set aside to use during such downturns to prevent having to impose a rate increase at the very time when customers themselves have lower revenues.

Bizarrely, given that the whole point of serious ATC restructuring is to de-politicize the ATC system and change its culture (as later discussed on pp. 9-10), a sentence on page 9 asks “whether the new entity’s employees would be considered federal government employees.” If an ATC reform ends up answering that question in the affirmative, the reform will be doomed to failure.

I have written a number of times about the game-changing nature of space-based ADS-B surveillance. It will make possible radar-like separation over the vast majority of the globe where there is either no radar coverage at all (oceans, polar regions), or inadequate coverage over large swathes of mountains and open country, especially in developing countries. The result will be a global leap forward in safer and more efficient air travel.

One of the most exciting examples is in southern Africa. Aireon has signed a Regional Commercialization Agreement with the ANSP of South Africa, ATNS. That ANSP, in turn, is part of a 15-country agreement to work together on air traffic control. Once the Aireon system is fully functional, in 2018, it will interface with the VSAT (very small aperture terminal) ground stations operated by ATNS to assist the ANSPs of the other 14 countries. This will bring radar-like surveillance data to the airspace of all 15 countries in southern Africa, where the current level of ATC services varies considerably.

Last month Aireon announced that the first launch, of 10 Iridium NEXT satellites including the ADS-B payload, would take place in late September, from Vandenberg Air Force Base on the California coast. The launch provider is SpaceX, and the launch vehicle is its Falcon 9. Alas, the loss of a Falcon 9 on the launch pad at Cape Canaveral on Sept. 1st may lead to a postponement of the launch from Vandenberg. As of Sept. 7th, Aireon tells me that they and Iridium are awaiting further word from Space X on whether there will be a launch delay. The 10-satellite payload has been mated to the dispenser, and the Falcon 9 is on the launch pad.

The Wall Street Journal had an informative article on Iridium’s replacement of its aging constellation with 81 Iridium NEXT satellites. The article noted that “FAA and industry officials are conducting a cost-benefit analysis” so that the agency can make a decision about signing up for Aireon’s services. And reporter Andy Pasztor wrote that FAA’s decision is expected sometime next year.

While we’re awaiting these launches, let me recommend an outstanding read for those of you like me who are aviation/aerospace buffs. It’s John Bloom’s Eccentric Orbits: The Iridium Story, released this spring. It tells the inspiring story of a band of Motorola engineers coming up with the concept for a massive low-earth-orbit constellation of communications satellites, the subsequent development and launch of the network, and the failure of market demand to materialize at the prices Motorola had to charge given the huge development costs. Bloom then goes on to chronicle the amazing story of how former airline executive Dan Colussy struggled for a number of years to acquire the company out of bankruptcy, against the opposition of Motorola which sought to de-orbit all the satellites. The book has been on Amazon’s top-20 business books list, and has received excellent reviews in media such as The Economist and The Wall Street Journal. Highly recommended.

The Aviation Trust Fund received between $1 billion and $2 billion less than aircraft purchasers of turbine fuel paid in fuel taxes from 2006 through 2015, according to an audit report from the Government Accountability Office released last month (GAO-16-746R). That finding helps explain the disparity between what business jet groups like NBAA claim their sector is paying and what FAA cost accounting shows as their contribution to the Trust Fund.

The problem came about because Congress sought to stop reported fraud in the early 2000s, after a 2001 study by KPMG found that more jet fuel was being produced than was apparently being consumer by owner/operators of turbine business aircraft. There were indications that jet fuel was being sold to diesel truck operators, because the tax on jet fuel was much lower than the tax on diesel fuel. In 2006, Congress changed the location where jet fuel was taxed and equalized the tax rates between the two fuels. However, because it wanted to retain a slightly lower tax rate for non-commercial jet fuel ($0.219/gal., rather than $0.244/gal.), Congress directed that dealers selling noncommercial jet fuel charge the $0.244 tax but apply for a refund of the difference. It also directed that the proceeds from the jet fuel tax be initially deposited into the Highway Trust Fund, with the Treasury to subsequently transfer the tax money to the Aviation Trust fund after evidence that it was legitimately being used as jet fuel. (Only Congress could concoct such a scheme!)

GAO found that following these changes, diversion of jet fuel to trucking virtually ceased. But it also found that many vendors of jet fuel did not bother to fill out the paperwork to reclaim the difference between the two tax rates. Therefore, the Highway Trust Fund over the 10-year period ended up with between $1 billion and $2 billion more than it was entitled to—and of course the Aviation Trust Fund was deprived of the same amount. (The disparity in amounts is due to differences between IRS data and FAA data, which itself should be a cause for worry.)

GAO did not address what difference this may have made in the amount that operators of business and general-aviation turbine aircraft paid into the Aviation Trust Fund during this period. I recall attending a Business Roundtable briefing in October 2014 at which GRA, Inc. presented detailed FAA data on the cost of various ATC services, the use of those services by various categories of aircraft operators, and the amount of aviation user tax revenue generated by each category. One of the surprising findings of that briefing was that non-commercial turbine fuel users (mostly business jets) paid only $64 million in jet fuel taxes in FY 2013. What happens if we recalculate that share, using what GAO learned about some of those payments never making it into the Aviation Trust Fund?

Using FY 2013 as a starting point, and taking the mid-point of GAO’s estimates, the average annual shortfall from that segment of aviation would be $150 million ($1.5 billion divided by 10 years). Adding that to the reported $64 million yields $214 million, a much larger contribution. That amounts to 1.6% of total Trust Fund receipts for that year, rather than the measly 0.5% in the GRA briefing.

That’s not the end of the story. The GRA briefing also used data from FAA’s ETMS flight activity reports to determine what fraction of flight activity (and hence ATC workload) was represented by each segment of aviation. General aviation turbine represented 11% of ETMS flights in FY 2013. That’s nearly seven times its (corrected) share of payments into the Trust Fund.

For several years I’ve been reporting on the FAA’s bizarre use of a Biographical Assessment to screen all applicants for controller positions. No matter how much ATC-related education, or past military ATC experience applicants had, if they failed to pass the BA (for undisclosed reasons), they were simply out of contention.

A bipartisan group of Members of Congress took up the case of these frozen-out applicants, and their efforts paid off, at least in part, in the FAA reauthorization bill enacted in July. First, the bill requires a permanent increase in the maximum age for new hires—from 30 before to 35 now. Second, it requires FAA to recruit 50% of new hires from those with ATC-related education or experience (i.e., former military or contract tower controllers and Collegiate Training Initiative graduates)—and exempts all of them from having to take and pass the BA. Unfortunately, the other 50% will be off-the-street candidates who must “pass” the BA in order to proceed further.

This compromise has not deflected an ongoing lawsuit by the Mountain States Legal Foundation arguing that use of the BA amounts to an effort to use race as a factor in selection. The class action lawsuit is representing CTI graduates who received high scores on the then-current FAA ATSAT (Air Traffic Selection and Training) exam, but were not considered, due to failing to pass the BA.

But there is one more piece of good news. Last month FAA announced the winner for a five-year contract to replace ATSAT with a better qualification/screening test. The winner is SureSelect, developed by the training subsidiary of Airways New Zealand and used in its various global ATC training service activities. This is the first time that FAA has chosen a test developed by a successful ANSP and used worldwide. As part of its competitive selection process, FAA carried out a validation study, and the results showed that those who performed well on SureSelect also perform well on controlling air traffic. This looks like a smart move on FAA’s part.

Keep the FAA’s Head in the Clouds: Why the Agency Should Not Be Regulating Space

We are on the cusp of a new era in commercial spaceflight, more ambitious than anything that has come before. There have been commercial communications satellites for decades, but now we are seeing a profusion of plans for commercial remote sensing, satellite Internet, and even — with a recent announcement of the planned launch oforbital habitats in 2020 by Bigelow Aerospace—commercial lodging. But at this critical early moment, as these new space businesses are designing, building, and scheduling—and as they are seeking investors and customers—they now face a worrisome problem: regulatory uncertainty.

Why does this new industry need regulation at all? For one thing, there is growing recognition in Washington of the need to regulate new commercial orbital activity in accordance with our national obligations under Article VI of the Outer Space Treaty, which holds our government responsible for the country’s activities in space, “whether such activities are carried on by governmental agencies or by non-governmental entities.” In addition, much of the new commercial activity will occur in low Earth orbit, and will dramatically increase the number of objects there — meaning that there will be a higher possibility of collisions and a greater need for “space traffic control,” a task today managed by the Joint Space Operations Center of the U.S. Air Force. If civilian firms start venturing into space, it will no longer be appropriate for the Air Force to handle this task by itself, and there are hints that the Air Force would like to hand off the role to another entity. It appears likely that this responsibility will be transferred to some other governmental agency. But which one?

The FAA’s Office of Commercial Space Transportation (OCST) might at first seem like a good fit for the job. After all, OCST has been licensing American space launches for decades, and the FAA has maintained air traffic control in the United States for much longer than that. Accordingly, it might appear natural simply to extend its role from regulating flight in the atmosphere to regulating flight in the vacuum of space.

But it’s not that simple. Space traffic control is not exactly analogous to air traffic control over sovereign territory, and the FAA is poorly suited for the challenges of regulating this new industry. Indeed, the agency’s present involvement in licensing space launches is just an accident of history. In the early 1980s, as now, the commercial space-launch industry faced worrisome regulatory uncertainty — a problem solved with the passage of the Commercial Space Launch Act in 1984, which assigned the Department of Transportation responsibility for both regulating and promoting the industry. A new office within the department — OCST — was created to do this work. But in 1993, OCST was demoted. As part of Vice President Al Gore’s “streamlining government” initiative, it was folded into FAA purely by executive action, and its head was made a civil-service position rather than a politically appointed one.

This 1993 decision should be reversed, and OCST should be detached from FAA, reporting instead directly to the Secretary of Transportation again. Doing so would elevate the importance of the office and therefore of commercial space, and give it more clout in annual budget battles. In addition, doing so would resolve a fundamental culture clash between FAA and OCST. As mentioned above, OCST is charged with both regulating and promoting the space-launch industry. But FAA sees itself strictly as a regulatory agency; its former role of promoting the airline industry was removed by Congress in the 1990s. Restoring OCST to its original location in DOT would help ensure that its industry-promoting work is not hampered by the FAA’s current safety-first approach.

In Congress, the American Space Renaissance Act would take important first steps toward fixing some of these problems. Its sponsor, Rep. James Bridenstine (R, OK), deserves praise for helping to start a public conversation about the kinds of reforms the moment calls for. The bill would once again make the head of OCST a political appointee, elevated to the rank of assistant secretary. And it would prohibit the FAA’s Air Traffic Organization from performing space traffic control. But the bill does not go far enough: it does not separate OCST from the FAA. In debating the bill, Congress should restore OCST’s independence of FAA. (This could also be done by an executive order, since the merger of OCST and FAA was originally an executive action.)

Yet even that would be only a partial measure. OCST regulates only launch and entry, but there are many other activities that the new space businesses are planning to engage in — activities in space that will not have anything to do with transportation per se. Future businesses may wish to undertake activities that aren’t even anticipated today. Extending the regulatory reach of OCST to include all these activities is not as simple as it might seem. For example, should OCST — or any part of DOT — be involved in overseeing alcohol or other intoxicant use on U.S. registered space vessels? What about gambling? What about firearms? And what is a U.S. registered vessel in this context? Who would register it?

It is also hard to imagine any part of DOT playing a productive role in space traffic control (including space situational awareness) in the statutory equivalent of international waters. Neither OCST nor any other part of DOT should be entrusted to take over this responsibility from the Air Force: not only does the department lack the necessary expertise and equipment, but extending OCST’s writ in this manner could dilute its ability to continue to carry out its critical launch-licensing functions.

A better regulatory approach would involve creating a new agency — one that can be both a uniformed service entrusted with high-level classified information and an agency relied on to carry out regulatory tasks in a user-friendly, transparent setting. Fortunately, we have such a model: the U.S. Coast Guard. As James C. Bennett argued in The New Atlantis in 2011, a new U.S. Space Guard would be well suited to handle the diverse range of technical, regulatory, constabulary, and operational tasks up to and including space rescue, required as our nation moves seriously into space. Such an entity, with its own service academy, would also be more trusted to interact with related agencies of other nations (as the Coast Guard does) than either the Air Force or the FAA.

Creating a new agency to help regulate a major new field of human endeavor may seem an insurmountable challenge for our political system, which nowadays has trouble passing even routine legislation, and which seems capable of acting swiftly only in an emergency. But creating the Space Guard is, as Bennett argues, a practical, modest, and fiscally prudent solution to problems that will soon be on our doorstep, as part of a broader effort to retool our antiquated Cold War space policy for the 21st century. The entrepreneurs and business leaders now working to create a future in space should encourage our policymakers to give this idea serious consideration.

A slightly longer version of this article appeared in the June 2015 issue of The New Atlantis, and is reprinted here with their permission.

Note: I do not have the space to list all aviation events that might be of interest to readers of this newsletter. Listed here are only those at which a Reason Foundation transportation researcher is speaking or moderating.

The Military and an ATC Corporation? No Big Deal. Over the summer, Sen. Bill Nelson (R, FL) argued that the Defense Department would never go for a plan to corporatize the U.S ATC system. In a piece posted on the Reason Foundation website, I explained why civil-military cooperation and coordination, as exists in scores of countries with corporatized ANSPs, was likely to be the pattern in the United States as well. My supposition was confirmed by a well-informed Pentagon source who pointed out that it might well make sense for DoD to be represented on the ATC corporation’s stakeholder board. (http://reason.org/blog/show/the-military-and-atc-corporation-no)

Why Non-Aviation Users Need GPS Backup. The aviation community, while recognizing the critical need for a reliable back-up system for GPS and its counterparts, is too often narrowly focused on solutions just for air navigation. An excellent article in The Atlantic by Dan Glass explains, in lay-person language, the numerous threats to GPS availability and the myriad user communities that rely on position, navigation, and timing signals provided by GPS—including nearly all financial transactions, telecommunications, seismic monitoring, truck routing, precision agriculture, etc. The piece makes a good case for a high-priority federal effort to implement at least an interim GPS backup capability in the near term. (http://www.theatlantic.com/technology/archive/2016/06/what-happens-if-GPS-fails/486824)

Argentina Separates Air Safety Regulation from ATC Provision. Last month Argentina’s new reformist government separated air traffic provider EANA from the country’s Civil Aviation Administration (ANAC). The latter was created only in 2007; prior to that, the military ran air traffic control in Argentina. Under the new arrangement, ANAC will regulate the safety of ATC operations at arm’s length from the new ANSP, as is done in most developed countries. EANA announced that it will invest $121 million in infrastructure and advanced technology, according to an Aug. 10th report by Air Traffic Management. Controllers at two large airports took part in a strike in early July to protest short staffing.

Italian Government Divests 49% of ENAV. The Italian Ministry of Economy and Finances sold 49% of ENAV, the Italian ANSP, on the Milan Stock Exchange late in July. Bids came from 31 Qualified Investors in Italy and 167 multinational investors from elsewhere. Total demand was for eight times as many shares as were offered. Based on the price paid during the initial public offering, ENAV was valued at approximately $2 billion.

Nav Canada Board Approves Rate Decrease. On July 14th, the board of directors of Nav Canada formally approved the previously announced decrease in ATC user charges, averaging 7.6% across all users. The company estimates that the reduced rates will save its customers $77 million per year. The rates went into effect at the start of Nav Canada’s new fiscal year, September 1st.

Belfast City Airport Contracts Out Its Control Tower Services. Airports in the United Kingdom are responsible for their own control towers, which they may either operate themselves (in accordance with national government safety regulations) or outsource to qualified control tower companies. Until this year, Belfast City Airport had self-provided tower services, but this year decided to outsource the function. Competing bids were submitted by Sweden’s ANSP, LFV, and a division of U.K. ANSP, NATS. The latter was announced as the winner in mid-July. All current tower staff were transferred to NATS as part of the contract.

Free Route Airspace Expanding in Northern Europe. The Borealis Alliance of nine northern European ANSPs plans to introduce Free Route Airspace (FRA) across their entire land and oceanic airspace by 2021, and recently received a $71 million grant from the European Union to assist with the transition. In some of the world’s most complex and congested airspace, flights will be able to take shorter and more direct flight paths, saving time and fuel. The plan will permit FRA from the Baltic nations on the east, across the U.K. and Ireland, and extending to the eastern edge of Greenland.

Myanmar Signs MOA with Aireon for Space-Based ADS-B. Aireon announced in July that it has signed a Memorandum of Agreement with Myanmar’s Department of Civil Aviation (DCA) to explore the benefits and costs of subscribing to Aireon’s space-based ADS-B services. DCA’s Yangon Flight Information region includes all of Myanmar’s domestic airspace plus oceanic airspace. Singapore’s ANSP has already signed a service contract with Aireon, and India’s ANSP also has an MOA with the company.

Airways NZ Teams with Aviation Australia on Controller Training. The ANSP of New Zealand, Airways New Zealand, has announced an agreement to work with Aviation Australia, that country’s largest aviation training provider. The two will develop and operate a new controller training academy in Brisbane. Airways will implement its ab-initio ATC training curriculum at the new facility. The company has other joint ventures for controller training in China, Dubai, and Puerto Rico.

Philippines’ First RNP Procedures Donated by U.S. Companies. Honeywell and Hughes Aerospace have developed RNP arrival and departure procedures at Tacloban Airport, whose terminal and instrument landing systems were destroyed by Typhoon Haiyan in 2013. The companies donated the project, presumably to demonstrate the benefits that such procedures could offer to many other airports in this far-flung island nation. Aviation Daily (Aug. 3, 2016) noted that the Civil Aviation Authority of the Philippines “will likely target four or five other airports” for such improvements.

NextGen for Airports. The Transportation Research Board recently published “Understanding the Airport’s role in Performance-Based Navigation,” denoted as Volume 1 in a series on NextGen for Airports. The report was developed as part of the Airport Cooperative Research Program and is obtainable via the TRB website as ACRP Report 150.

“In the mid-’80s, when I was at DOT and was the deputy secretary to Elizabeth Dole, we spent a couple of years convincing Congress that we should take National and Dulles airports, which at that time were departments of the FAA, and transfer them to a [new] regional authority. Congress at first was very reluctant to give up control of the DC airports, but the singular argument that convinced them was that those airports could then go the bond markets. If we hadn’t been successful in convincing Congress of that, Dulles’ main terminal would be half the size it is today, and Reagan National would still have as its main terminal what is now the A concourse, the oldest part of the facility.”
—Interview, “Former Transportation Secretary James Burnley on FAA Reauthorization,” Business Travel News, Aug. 15, 2016

“Fits and starts in budgeting for modernizing air traffic control have resulted in technology that’s outdated by the time it gets implemented. Our government has proven time and again that it can’t plan for long-term capital improvements, and the result is a system that can’t keep pace with the speed of technology. While our planes offer broadband Internet and live TV, they are guided by air traffic controllers using a system that dates back to the middle of last century. It makes no sense.”
—Robin Hayes, CEO of JetBlue, “Antiquated Air Traffic Control Hurts New York Economy,” Crain’s New York Business, Aug. 18, 2016

“Regardless of political considerations, ATC reform is essential for the future of our aviation system. Without it, we will sputter from piecemeal reform to piecemeal reform and achieve little. Only transformational reform—be it a nonprofit system or another innovative model—will allow the U.S. to efficiently and effectively deploy NextGen and reap the benefits of a modern ATC system. Canada has proven it can be done, and after 20 years they are a leader in innovation, efficiency, and safety. They have also just announced a 7.9 percent decrease in user fees, which means their user fees are now lower, in real terms, than when they were first enacted in 1999.”
—Rui Neiva, Eno Center for Transportation, “Time for an ATC Transformation?” Politico, July 25, 2016

“From a cost perspective, you’ll experience roughly similar costs of operation as in the U.S., although fuel costs are slightly higher and navigation fees are applicable to all movements within Canadian airspace. ‘Costs for operating in Canada are not too dissimilar from the U.S.,’ says Jeppeson Technical Sales and Support Mgr. Nancy Pierce.”
—Grant McLaren, “Flying Bizav Aircraft into Canada,” Professional Pilot, July 2016

“A few examples: the way the music industry matured away from physical formats; the speed with which telecommunications migrated from landline to digital; the readiness with which even former monopolistic power companies embraced competition and finally discovered customer service. All these industries recognized the value of using assets effectively, not just the cost of owning them. And yet many in our [ATC] industry cling to a belief that it could not happen here. By waving our safety—and essential service—flags, we tell ourselves that our ‘natural monopoly’ would be too dangerous to challenge. We can also find ourselves believing that flight information region boundaries are actual lines, or that control zones are set in something more substantial than vapor. The new entrants to our industry—unmanned aerial vehicles, high altitude balloons, satellites, rockets—do not operate to the same parameters, and are radically challenging our right as an industry to hide behind them.”
—Ed Sims, CEO of Airways New Zealand, “CANSO Chair Interview: Transformation Through Collaboration,” Airspace, Quarter 3 2016

The good news is that there was no airport screening fiasco over the Independence Day weekend last month. The bad news is that TSA, airlines, and airports threw together a mix of mostly one-time fixes that are not sustainable over the long term. As aviation consultant David Swierenga told columnist Justin Bachman, “In my view, it’s a problem waiting to recur. I haven’t seen that they’ve done any substantive changes in their procedures or manpower, so I don’t see that the problem is fixed.”

The bundle of one-time, non-sustainable fixes for the summer include the following:

More overtime during these several months (July 4th through Labor Day);

About 600 temporary contract workers hired by airlines to assist with non-screening duties at checkpoints;

A reported 1,000 part-time screeners converted to full-time, with no indication as to how long this status will last; and,

Some of TSA’s 2,660 Behavior Detection officers assigned some of the time to screening duties (since Congress merely allowed TSA to do this, rather than mandating that they convert them all to full-time screeners).

The only permanent changes, which will continue to reduce congestion and wait times, are the addition of 600 newly hired screeners (most still in training as of early August) and the planned installation of new, somewhat faster checkpoint carry-on luggage equipment at selected hubs of American, Delta, and United, at their own expense. This equipment is being installed at only a few large airports: Atlanta, Chicago O’Hare, DFW, Los Angeles, Miami, and Newark. The only airport where the new lanes are in operation this summer is Atlanta. And, please note, at airports where the major hub carrier operates from its own concourses (e.g., DFW, LAX, MIA), only those checkpoints will be getting the new gear. If you’re flying other airlines and using the other checkpoints, you’ll be stuck with the old, slower lanes.

Among the major often-congested airports not getting the new equipment are Charlotte, Chicago Midway, Denver, Detroit, Minneapolis/St. Paul, New York LaGuardia, New York JFK, Philadelphia, Phoenix, Seattle, Washington Dulles, and Washington Reagan.

TSA has been reporting amazingly short average wait times at major airports. For example, a Denver Post headline July 19th read “Wait to Clear Security at Denver Airport Hovering Around 10 Minutes, TSA Says.” In researching this article, I checked www.ifly.com, which provides detailed wait times for major airports, broken down by time of day and by checkpoint. Out of 24 time blocks at Denver’s centralized checkpoints, only four were in the 0-10 minute category; all the rest were in the 11-20 minute category. Not exactly “hovering around 10 minutes.” I used the same site to compare wait times at SFO (which has privatized screening) and LAX (with TSA screening). Both are major hubs (designated Category X by TSA), and both have checkpoints for each of a number of terminals. Out of all the time blocks at all the terminals, 32% of LAX’s were in the 0-10 minute category, with the rest at 11-20 minutes. At SFO, 46% were in the 0-10 minute group, the balance at 11-20 minutes.

TSA has never provided data comparing screening wait times at the 22 airports with screening provided by TSA-vetted security firms and comparable airports with TSA screeners. This lack of transparency should not be surprising, since TSA is both the aviation security regulator and by far the largest provider of screening. Not only that, there is a standard clause in TSA contracts with screening companies that forbids the companies from disclosing any data about their performance. I’ve long argued that Congress should separate screening from regulation, to remove TSA’s built-in conflict of interest. But in the interest of greater transparency, the least Congress could do would be to mandate full disclosure of screening performance, vetted for transparency by the Government Accountability Office.

Thanks to the diligent investigative reporting of the Daily Beast‘s Barbara Peterson, the whole air travel community now knows that TSA’s monopoly PreCheck sign-up contractor, Morpho Trust, has been preventing the planned major expansion of PreCheck. (“The TSA Company Suing the Feds and Keeping Airport Lines Clogged,” Barbara Peterson, The Daily Beast, July 1, 2016)

As I have recounted several times in recent years, TSA has struggled since 2013 to implement a third-party recruitment and vetting program under which big-data companies would market PreCheck to large numbers of air travelers, potentially partnering with major employers, trade associations, business parks, etc. Some of the companies proposed totally online enrollment, based on the premise that their pre-screening algorithm would reliably select low-risk candidates without the need for fingerprinting. Sources tell me that TSA had approved one or more such algorithms in previous rounds of testing, but the RFPs to solicit actual bids from pre-qualified companies were withdrawn several times in recent years, due to objections from privacy groups. A revised RFP was finally issued last fall, with the expectation that winning firms would be selected early in 2016 and have their large-scale recruitment efforts under way by summer. Among those widely believed to be planning to bid were AAAE, Clear, and Morpho Trust.

Unfortunately, in January Morpho filed a bid protest with the Government Accountability Office, alleging that TSA’s procurement method was illegal. GAO released its finding on May 16th, rejecting Morpho’s claim as unfounded. But the company then filed suit in federal court—which put the whole procurement on indefinite hold. TSA was given until July 22nd to respond to the suit, and a decision is not expected until October—after which Morpho might appeal.

Morpho evidently wants to have things its way, regardless of the impact on airports and air travelers. While the lawsuit drags on, it is expanding PreCheck enrollment centers under its current monopoly contract with TSA—adding temporary “pop-up” sites at places like Penn Station in New York and the Willis Tower in Chicago. If it wins the suit, its monopoly will remain as TSA’s only PreCheck sign-up contractor. If it loses, it still hopes to be selected as one of the new third-party providers. Heads I win; tails you lose.

TSA Administrator Peter Neffenger told a Senate hearing in June that, despite the lawsuit, “We are in the process of reviewing the submissions to the RFP and expect to award in late 2016.” That may actually happen, if Morpho does not appeal or if its appeal is swiftly denied. Under this optimistic scenario, large-scale PreCheck expansion could get under way early next year, in time for next summer’s peak travel season. But for this one company’s actions, many millions more people would already be using faster and more convenient PreCheck lanes this summer.

Canada’s relatively new Liberal government promised a large increase in infrastructure investment. And its March budget made reference to privatization and long-term public-private partnerships as means to that end. Recently it seems to have embraced the Australian concept of “asset recycling,” under which the government leases or sells major assets (airports, seaports, toll roads, etc.) to investors—and uses the proceeds to invest in needed new infrastructure.

Last month Transport Canada revealed that it is now looking into the possibility of privatizing the country’s major airports, which are owned by the federal government but operated by local nonprofit airport authorities that must pay significant annual lease payments to the government—some $5 billion since 1992 and a projected $12 billion more over the next 40 years. That has led at least one airport authority—Airports de Montreal—to do its own research on airport privatization, as I reported in the March issue of this newsletter. ADM sent a detailed report to the government in April 2015, the conclusion of which was that “the time has come to consider the evolution of the Canadian model toward real privatization, based on corporatization.”

So far, however, ADM seems to be the only major airport looking with favor on the federal government’s policy. The CEOs of Vancouver and Ottawa airports are raising all the knee-jerk concerns one might expect. Craig Richmond of Vancouver Airport Authority warned that under privatization, “You would see cutbacks on maintenance, cleaning; you would see them become much more crowded because of pressures on the management to deliver that return [on investment].” Ottawa airport CEO Mark Laroche said the “unintended consequence” of privatization would be higher fees, and “The cost of flying in Canada is high enough; you cannot ask travelers to pay more.” Thus far, officials of the Greater Toronto Airport Authority have refrained from such rhetoric, perhaps because they have a better understanding of how privatized airports in the rest of the world are governed and managed.

As the Montreal airport’s 2015 study makes clear, given the significant market power that most large airports possess, there is nearly always some form of regulatory oversight to protect airlines and passengers from paying monopoly prices. Second, there are several different models of airport privatization from which to choose. The Annex to ADM’s 2015 study outlines three of them, as follows:

Outright sale via an initial public offering of 100% of the shares in the airport corporation, dubbed the BAA model as implemented in the U.K.;

Partial privatization, in which the federal government (and possibly lower levels of government) retains partial share ownership and is represented on the governing board (the German and French model); and,

Long-term lease/concession, in which the federal government retains ownership but leases the assets and liabilities for 50 to 99 years, under terms spelled out in the concession agreement (the Australian model).

All three models include provisions to protect the public interest, and to the extent that these might limit, for example, runway charges, that impact will be taken into account in how much airport companies, infrastructure investment funds, and pension funds will pay for the enterprise. In addition, one of the benefits of privatization to the airports in question will be getting out from under the onerous lease payments they must now make to the federal government.

Moreover, as Ben Dachis of the C. D. Howe Institute in Toronto wrote in the Financial Post (July 12th), privatized airports worldwide generate higher per-passenger revenues from shopping and dining than traditionally managed airports. And freeing the airports from the current obligation to pay ever-higher rents to the government should refocus their managements’ attention on investments to better serve their customers.

Given the knee-jerk opposition from the Ottawa and Vancouver airport managements, perhaps the wisest course for the Canadian government would be to begin by corporatizing the airports and then allowing each to choose the model that its board feels most comfortable with. This would provide something of a natural experiment to see which model produces which results.

A bill introduced in the House in June, HR 5563, would eliminate the federal cap on passenger facility charges (PFCs), eliminate federal entitlement grants for large hub airports, and cut the size of the Airport Improvement Program (AIP) budget by a corresponding $400 million a year. Called the “Restoring Local Control of Airports Act of 2016,” it was introduced by a trio of conservative members: Rep. David Jolly (R, FL), Rep. Thomas Massie (R, KY), and Rep. Gus Bilirakis (R, FL). The sponsorship is significant, in that historically some of the opposition to PFCs has come from conservatives, who incorrectly viewed PFCs as taxes rather than user fees.

Marc Scribner of the Competitive Enterprise Institute (CEI) produced a blog post providing some context for this PFC proposal (cei.org, June 24th). First, Scribner debunks the claim (typically made by airlines) that PFCs are taxes (or even more misleadingly, “federal taxes”). In fact, there is a long legal history on the differences between a tax and a user fee—basically that a tax is imposed on everyone for general government purposes, while a user fee is paid by those who use and benefit from a specific service, and is used only to pay for that service.

Scribner next provides some historical context. The PFC idea was first developed by the U.S. DOT in the latter years of the Reagan presidency. The first report on the subject in my own files was produced when Jim Burnley was Secretary of Transportation. DOT’s chief scientist at the time, Fred Singer, explained the rationale for PFCs in a 1990 Cato Institute publication as not merely devolving funding authority to airports but also freeing them, at least in part, from financial dependence on incumbent carriers, who would often insist on exclusive-use gate leases in exchange for long-term lease and use agreements. A new local source of revenue would enable airports to expand terminals to make room for new entrants. The first PFC legislation was enacted during the George H. W. Bush Administration in 1990, as part of its proposed National Transportation Policy.

In addition to these conservative bona-fides, PFCs also have the support of transportation researchers at institutions like the Brookings Institution. Its Cliff Winston, along with Northeastern University economist Steve Morrison, estimated that limited airport gate availability suppresses airline competition, costing air travelers about $4.4 billion per year in higher air fares (2005 dollars).

Unfortunately, HR 5563 was not included in the FAA reauthorization bill enacted by Congress last month. It had the support of AAAE, ACI-North America, and the U.S. Travel Association. But since the reauthorization only goes until autumn of next year, there will be plenty of time for it to be introduced and debated in the new Congress.

Security breaches other than in the terminal continue to increase, according to both a new report from the Associated Press and an audit by the Government Accountability Office.

AP released an update of its 2015 report on breaches of large-airport perimeters. The report, based on a survey of airport officials, identified 39 such breaches in 2015, up from 34 in 2013 but the same as the 39 reported in 2014. The top four airports over the period from 2004 through 2015 were San Francisco (41), Las Vegas (30), Philadelphia (30), and Los Angeles (26). AP’s tally for the entire period was 345 breaches, occurring at 31 airports that handle 75% of all U.S. passenger travel.

What AP found disturbing about its findings was not just the number, or the continuation of these occurrences year after year. It was also that some airports have not been disclosing perimeter breaches, and others argue that because the vast majority of the 345 were by amateurs, drunks, or misguided people—not terrorists—they should not be taken seriously as security breaches. But if people can jump an airport fence or walk through an open gate without being stopped—and sometimes get all the way to parked aircraft before being noticed—than that airport has a security problem.

Shortly after the AP report came out, GAO released the unclassified version of its audit of airport perimeter security and access control (GAO-16-632). Their auditors found that the combined total of perimeter and access breaches at all commercial airports had increased from 2,700 in 2013 to 2,900 in 2015. TSA keeps tabs on airport vulnerabilities in these areas primarily by conducting Joint Vulnerability Assessments (JVAs)—an activity performed by an FBI/TSA team. Between 2009 and 2015, JVAs were carried out at 81 airports, mostly the largest ones (Categories X and I). Extending this process to numerous smaller airports, TSA told GAO, was beyond its budgetary resources, but the agency agreed with GAO’s recommendation that it develop a self-assessment tool for smaller airports to use, instead of a JVA.

GAO also faulted TSA for not having updated its comprehensive 2013 Risk Assessment of airport perimeter and access security to take into account changes since then, and TSA agreed to do so.

Atlanta and Charlotte—both large fortress hub airports, with Delta and American, respectively, as their anchor tenants—recently signed new long-term airline lease agreements. Both continue the ongoing trend of such leases being considerably shorter than the pre-deregulation standard of 30 years. But aside from that, the two are quite different.

In Atlanta, Delta continued to throw its weight around, treating the airport as its own. In exchange for agreeing to another 20 years and committing to pay for half of a $6 billion expansion program, Delta got the city government to write into the lease that the city of Atlanta “does not currently plan to and will not own or operate any other airports of any type, as a part of any City airport system.” That pledge bolsters Delta’s several-year battle to prevent first Gwinnett County and now Paulding County from building a passenger terminal at each one’s small airport in hopes of attracting low-cost airlines. As for the $6 billion expansion of ATL, in addition to a new runway (which will help all airport users) the program includes a $900 million international concourse (likely used mostly by DL and its code-share partners) and some additional passenger gates. Whether those gates are exclusive-use to DL has not been disclosed.

By contrast, the new lease at Charlotte Douglas is for a mere 10 years, compared with the expiring 30-year lease. It continues sharing with airline tenants 40% of the profits from concessions and parking, in proportion to their enplanements. And it includes $500 million worth of new projects, including new gates. And those new gates will not be for American’s exclusive use. In fact, the new lease no longer includes a traditional “majority-in-interest” clause, under which incumbent airlines can veto any project that adds terminal and gate space for new entrants. This is good for Charlotte residents who may benefit from new competition by low-cost carriers. Agreeing to it was a statesman-like decision by American.

2016 Annual Privatization Report Online. The Air Transportation chapter of Reason Foundation’s Annual Privatization Report 2016 was posted this week. As in previous years, your editor is the author of this document, which covers airport privatization, air traffic control, and U.S. airport security. Go to http://reason.org/news/show/apr-2016-air-transportation.

LaGuardia Terminal Bonds 10 Times Oversubscribed. Revenue bonds for the $2.6 billion public-private partnership to replace the Central Terminal at LGA experienced demand 10 times as great as the amount of bonds on offer. The long-term concession deal is led by Meridiam, Skanska, and Vantage Airports. It is part of an overall $4 billion revamp that includes new parking structures and roadway changes, with those portions funded by the airport operator, the Port Authority of New York and New Jersey.

PreCheck Provides Increased Security at Lower Cost. A new study by aviation security researchers Mark Stewart and John Mueller finds that in addition to saving passengers time and saving TSA money, the risk-based PreCheck program likely provides a slight additional benefit in risk reduction. The detailed analysis is based on defensible assumptions and careful calculations. (“Risk-Based Passenger Screening: Risk and Economic Assessment of TSA PreCheck—Increased Security at Reduced Cost?” Mark G. Stewart and John Mueller, University of Newcastle, Report No. 283.06.2016, June 2016)

Ontario Airport Transfer Law Approved by Congress. Congress last month approved legislation granting federal approval to the negotiated deal that will transfer Ontario Airport from Los Angeles World Airports to the recently created Ontario International Airport Authority. The new entity will reimburse LAWA via payments of $120 million (from passenger facility charges) over the next decade, while OIAA will assume all current airport debt. LAWA invested nearly $500 million in ONT during the several decades it owned the airport.

GAO Calls for Risk-Based Air Marshal Policies. Based on an 18-month audit of the Federal Air Marshals Service (FAMS), the Government Accountability Office found that FAMS only gives lip service to risk-based decision-making. In its report (GAO-16-582), the auditors proposed ways in which FAMS could incorporate risk into its allocation of marshals between domestic and international flights, in its decisions about geographical focus areas, and in documenting the rationale for its international route deployments. The classified version of this report was released to relevant parties back in February; the sanitized version was released in June.

London City Expansion Approved. The U.K. government on July 27th approved London City Airport’s planned $450 million expansion plans. This will include expanding the terminal, adding a new taxiway, and providing additional aircraft parking room, which the airport company hopes will lead to increasing flights from 70,000 to a permitted 111,000 per year. The airport is now owned largely by Ontario Teachers’ Pension Plan and Borealis Infrastructure, both Canadian public pension funds.

Greek Airport Workers Call Off Strike. A planned five-day strike to protest further airport privatization in Greece late in June was averted at the last minute. After intervention by the Transport Minister, who offered further study of plans to privatize 23 more airports, union OSYPA agreed to call off the strike. Greek unions have a long history of opposing privatization of airports, seaports, and other infrastructure, much of which has been mandated by European bodies as conditions in exchange for bailouts of the Greek government. A previously agreed concession agreement under which Fraport is taking over 14 regional airports is proceeding as planned.

Reagan National Airport to Get $1 Billion Upgrade. To relieve significant overcrowding and improve the passenger experience, the Metropolitan Washington Airport Authority has launched a $1 billion renovation of DCA. It will include adding a new concourse for short-haul/regional flights, relocating security checkpoints to a lower level, and bringing the existing screening/lobby area and its shops and restaurants into the post-security zone. DCA currently handles over 23 million passengers a year, compared with design capacity of 15-16 million.

Belfast Outsources Control Tower Services. Belfast City Airport, in Northern Ireland, has shifted from self-provision of tower services to contract provision. The winning bidder in a three-way competition was NATS, the U.K. air navigation service provider, which already operated the towers at 13 other U.K. airports. Competing bids came from Air Navigation Services and from LFV, the Swedish air navigation service provider. Control towers in the U.K. are an airport responsibility, and they may either self-provide or contract with a certified provider. All existing tower employees at Belfast will join NATS and continue working at the tower.

Companies Bid for Paraguay Airport. Three teams submitted bids for the estimated $149 million upgrade of the airport in Asuncion, Paraguay’s capital city. The teams were led by Vinci, Sacyr, and CEDICOR, respectively. The winning team will acquire a 30-year concession for the airport, and will be responsible for investing in terminal and runway improvements.

Albany Security Proposal Raises Civil Liberties Concerns. Albany County, New York officials stirred up considerable opposition when they proposed to make refusing security screening at Albany Airport a misdemeanor. The proposal was submitted as a bill to the state legislature, but has come under fire from the New York Civil Liberties Union and Muslim groups. The proposed law was intended to apply to those flagged for additional screening who decide to not make the plane trip after all. But the way it is written, it could also apply to anyone who leaves the line even before reaching the metal detector.

Brazil May Sell the Rest of Rio and Sao Paulo Airports. The financially strapped Brazilian government, which partially privatized its major airports several years ago, is taking a fresh look at selling the government’s remaining shareholdings in Santos Dumont Airport in Rio and Congonhas Airport in Sao Paulo. The change is part of the reform agenda of interim President Michel Temer. The government plans a number of asset divestitures as part of its overall debt- and deficit-reduction efforts.

India to Allow Full Foreign Ownership. As part of a broad economic liberalization, the Indian government announced in June that it will permit investors, regardless of nationality, to own 100% of major airports. Last fall this provision was initially approved for brand-new (“greenfield”) airports, but the decision in June extends the policy to existing airports, most of which are in need of serious investment for expansion and modernization.

Delta Refinery Operating at a Loss. For the first half of 2016, Delta Airlines’ much-touted oil refinery in Trainer, PA achieved a $38 million operating loss. The airline purchased the refinery in 2012, on the premise that doing so would guarantee it access to fuel at lower cost. Most economists would have advised against such a deal, on grounds that the price of jet fuel is set in global markets, and Delta would be foregoing revenue if it sold itself oil that it could have sold to others at market value.

Winners Announced for French Airports. The second round of bidding for the French national government’s 60% stake in the Lyon and Nice airports yielded bids from 11 teams by the July 4 deadline. Winning the competition for Nice Cote d’Azur was the team led by Atlantia and EDF Invest, bidding $1.35 billion. And the winner of Lyon-Saint-Expury was the consortium of Vinci/Caisse des Depots/Predica, bidding $593 million.

Newark Slots Yield Winners and Losers. Thanks to the FAA reclassifying Newark (EWR) as a less-congested Level 2 airport (previously Level 3), its former limit of 81 landing/take-off slots per hour will be lifted this fall. And thanks to the Justice Department denying permission for dominant EWR carrier United to acquire 24 more slots there from Delta, the “value” of United’s hoarded slots has fallen. It announced on July12th that it will write off $264 million due to the slot changes. Meanwhile, airlines whose presence at EWR was highly restricted, have begun discussing added service there, including JetBlue, Southwest, and Virgin America. And ultra-low-cost carrier Allegiant recently announced plans to launch service from EWR this fall.

“The agency [TSA] has resolved nothing It just threw an unsustainable amount of human labor at the problem. The demand for security checkpoint services is still up an arguable 7 percent over 2013, just as it was in May. And TSA’s budget is still 10 percent smaller, just as it was six weeks ago.”
—Dan Reed, “Fooled Again! TSA Used Tricks to Cut Holiday Wait Times but Still Hasn’t Rightly Defined the Problem,” Forbes.com, July 7, 2016

“Our adversaries have more or less given up on the notion of grandeur. When before they seemed focused on spectacular attacks on iconic infrastructure, terrorists today seem content to assault everyday locations—cafes in Paris, parties in San Bernardino, and clubs in Orlando. The breakdown in assumptions means that virtually none of our [security] doctrine fits any longer. Pushing the borders out is useless when borders don’t matter. Focusing on preventing significant and high-consequence events is wrong if the targets now are the stuff of common, daily life. And if everything is a potential target, we can’t afford layers of defense. Give our resources, we can barely afford a single layer of questionable effectiveness (like the bouncer at the club or the security guard at the mall).”
—Paul Rosenzweig, “Rethinking the Doctrine of Homeland Security—Reflections on Orlando,” Lawfare, June 29, 2016

“Take the long security screening lines that have become the bane of air travelers everywhere. An ambitious terrorist could easily detonate a bomb in the crowd, killing hundreds and scaring Americans away from air travel—possibly for good. Moving the lines further out of the airport simply recreates the problem elsewhere. And as security measures become more stringent, our freedom to travel is encumbered, though we aren’t any safer than before.”
—Gary Leff, “A Choice Too Far?” Doublethink, Winter 2002 (http://americasfuture.org/a-choice-too-far)

“Only a handful of airports participate [in the Screening Partnership Program], as TSA chooses the security company and micromanages the contract. That isn’t a partnership. Congress could stipulate that an airport manage its own bidding and operations; the government would remain as a safety regulator. Executives at Hartsfield-Jackson in Atlanta and elsewhere have floated dropping TSA, but without Congress that’s about as useful as hiring circus entertainers to distract the disgruntled, as San Diego International tried recently.”
—”The TSA’s Summer of Lines,” editorial, The Wall Street Journal, May 28, 2016

In response to a recent Wall Street Journal editorial supporting ATC corporatization along the lines of the House bill, Delta’s Steve Dickson sent a letter that’s a model of distorting facts in order to make its case. The thrust of the letter was two-fold: asserting that FAA is leading the world in advanced ATC technology and dismissing the world-leading performance of Nav Canada, whose non-profit model is the basis for the corporation proposal in the House bill.

Dickson’s first claim was that, thanks to FAA progress, “more than 1.7 million aircraft are tracked daily using GPS.” An expert on FAA operations data emailed me to cast doubt on that number, having no idea where Dickson could have gotten it. If true, it would mean about 621 million aircraft handled per year—yet FAA data for en-route airspace in FY 2015 totals about 42 million annual transactions (based on each transit of a center counting for three transactions: an arrival, a transit, and a departure). Dickson’s fanciful total is aimed at grossly exaggerating the traffic volume in U.S. airspace—implicitly compared to 2nd-largest Nav Canada.

Second, he claims that “FAA already delivers better results than other providers around the world.” In my reply, which the WSJ published on June 30th, I cited objective data from CANSO on two critically important performance metrics. FAA’s cost per IFR flight hour, at $450, is much higher than Nav Canada’s $340 (both figures in U.S. dollars). And Nav Canada’s controller productivity is also higher, achieving 1,760 flight hours per controller per year, compared with FAA’s 1,725. Since it is well-known that there are economies of scale in air traffic control, other things equal, the FAA as the world’s largest provider should have significantly higher productivity and lower unit costs. Perhaps Nav Canada’s world-leading automation technology has something to do with the difference.

Dickson also touts Delta’s active participation in RTCA’s NextGen Advisory Committee (NAC) to advise FAA on which modernization projects should get near-term priority. However, he fails to mention that at the June 18th NAC meeting, Delta opposed a proposal to create a working group on space-based ADS-B, an area where FAA is lagging woefully behind other ANSPs. Fortunately, the measure passed with the support of American, FedEx, and NATCA, despite Delta’s opposition.

Finally, in the most egregious misrepresentation of all, Dickson wrote the following: “[U]nder the proposed House bill, travelers would continue paying taxes on airline tickets, in addition to paying new user fees,” which he goes on to say would increase ATC costs by 20% to 29%. This is a classic propaganda trick. The House draft as of now still has no revenue title (which must come from the Ways & Means Committee, not the authorizing committee that wrote the bill, Transportation & Infrastructure). The clear intent of everyone supporting corporatization is that ATC fees would replace nearly all current aviation excise taxes, leaving only enough to pay for the airport grants program (AIP). So Dickson’s statement, while technically true, is a gross distortion of reality.

The specter of increased ATC costs is a staple of anti-corporatization propaganda, including bizarre claims about Nav Canada rate increases during its 20-year history. The graph below, from the current issue of the company’s newsletter Direct Route, shows that several rate increases were imposed following the shrinkage of air travel after 9/11. But rates were subsequently reduced and are today far below the rate of consumer price inflation in Canada. Inflation has increased about 140% since 1999, when Nav Canada’s initial ATC fees replaced the Canadian ticket tax. But the company’s rates have increased just 5% over that same time period. And that is before the rate decrease announced recently for FY 2017 (indicated by the dashed lines on the graph). That would put the rates below the level they were at in 1999, in real terms. No evidence of cost increases there!

The Flight Safety Foundation last month released its report, “Benefits Analysis of Space-Based ADS-B Technology.” It provides a careful look at near-term, mid-term, and long-term benefits of this important improvement in global aviation surveillance.

The report identifies a number of aviation problems that space-based ADS-B will address, including the following:

Oceanic and remote airspace currently lacks surveillance. Space-based ADS-B will provide near-real-time surveillance of all this airspace, functionally equivalent to radar, and will facilitate reducing separation minima in such airspace, thereby increasing capacity.

Aircraft position errors, on or near boundaries of two different flight information regions (FIRs), are still common. Space-based ADS-B will “introduce significant safety benefits” by avoiding positional errors that now occur in such situations, and handovers from one FIR to the next should be more precise, reducing controller and pilot workload, while increasing safety.

Current flight trajectory monitoring is generally once per 30 minutes in oceanic and remote airspace, leading to significant off-track errors. Space-based ADS-B will change this to once every 8 seconds, permitting nearly real-time detection of aircraft not on predicted flight paths.

There is insufficient surveillance over designated conflict zones and volcanic ash clouds. In such airspace, space-based ADS-B will permit better pre-planning and more accurate diversion routes, improving the global safety net.

Locating black boxes after a crash can involve huge areas, leading to costly and time-consuming searches. Space-based ADS-B will provide time-critical flight data to narrow the search area considerably.

Progress toward implementing global space-based ADS-B continues. CANSO (the international association of ANSPs) released “Guidelines for Implementing ATS Surveillance Services Using Space-Based ADS-B” in March. ANSPs continue to sign Memoranda of Agreement with leading provider Aireon, to explore whether and how to implement space-based ADS-B within their airspace. Aireon announced on June 1st that Harris Corporation has completed production of all 81 ADS-B payloads to be launched on the Iridium Next satellite constellation beginning this year and continuing in 2017.

And benefits will begin soon thereafter. Nav Canada and NATS have announced that Aireon services will be implemented in the Gander Oceanic Control Area and the Shanwick OCA in 2018, which will enable longitudinal separation standard on their North Atlantic Tracks to be reduced from 40 nm to just 15 nm. That means many more planes will be able to use preferred altitudes that minimize fuel burn and GHG emissions.

Flight Safety Foundation vice president for global programs, Greg Marshall summed up the benefits of space-based ADS-B as follows: “The ability to provide near-real-time global surveillance is a game-changer for the aviation industry. This type of innovative capability comes along once in a generation. I think we can agree, it is always safer when the controller knows exactly where the plane is, 100 percent of the time.”

The DOT Inspector General issued a report on May 9th dinging the FAA for over-use of sole-source contracts (ZA-2016-065). In July 2009, the Office of Management & Budget directed all federal agencies to reduce the use of non-competitive contracts, including sole-source ones. Of all DOT agencies, FAA awards far more such contracts than any other, amounting to 65% of all DOT sole-source awards. The IG’s report finds that FAA fails to adhere to the standardized process for assessing potential follow-on contracts required by its Acquisition Management System (AMS). Between 2008 and 2014 FAA issued sole-source contracts totaling $2.4 billion. And the IG found that it did not even report to DOT 81 sole-source contracts during fiscal years 2012 through 2014.

But I searched in vain in this report for what is perhaps the most consequential sole-source decision FAA has made in recent years: Phase 3 of its Terminal Automation Modernization/Replacement program (TAMR). This is the over-budget and much-delayed procurement that is replacing the CARTS system with STARS at 11 of the country’s largest TRACON facilities.

A highly knowledgeable informant sent me a detailed email about this. He noted that “FAA spent billions of dollars to build a STARS/TAMR system to meet the requirements that CARTS already met.” He also pointed out that FAA started down the path of a competitive procurement, but got diverted, as noted in a 2013 I.G. report that is eerily prescient about forthcoming problems: “FAA’s Acquisition Strategy for Terminal Modernization Is at Risk for Cost Increases, Schedule Delays, and Performance Shortfalls” (AV-2013-097, May 29, 2013).

That report explains (p. 11) that FAA considered two alternatives for Phase 3. One was to replace CARTS with STARS at the 11 large TRACONs, at an estimated cost of $462 million. The other was to retain CARTS at the large TRACONs and to replace STARS at 52 Phase 1 sites with CARTS (estimated to cost $731 million). But the I.G. notes that this cost comparison omitted $270 million in costs needed to support computer and software upgrades to STARS in the first alternative—which would have made the costs equal. And the I.G. also notes that FAA did not even attempt to estimate the benefits of the two alternatives.

My informant believes that the situation the FAA faced at that juncture clearly merited a competitive procurement, in which the STARS and CARTS contractors could have each bid their system. The CARTS baseline, he wrote, “already met the requirements, based on all the software changes needed to upgrade STARS to the same functionality as CARTS.” And he maintains that since open competition is a fundamental principle of FAA’s Acquisition Management System, the agency appears to have violated this principle by, in effect, cooking the books in favor of sole-source procurement of STARS for Phase 3. He also noted another difference: FAA owned unlimited data rights to CARTS, but the STARS contractor owns all data rights to STARS. That would certainly amount to a difference in benefits between the two alternatives.

This is yet another example, I’m afraid, that the FAA’s organizational culture does not reflect the best interests of its customers.

The House Aviation Subcommittee held a hearing on ATC staffing on June 6th. There was bipartisan agreement that (1) the controller staffing situation is dire, and (2) hiring procedures need to be changed, including the ludicrous Biographical Assessment that FAA introduced in 2013.

Controllers’ union NATCA President Paul Rinaldi told Members that the number of fully certified controllers is at a 27-year low, with a 10% decrease since 2011, as hiring and training failed to keep pace with retirements. Chairman Frank LoBiondo (R, NJ) pointed out that FAA has missed its controller hiring goals for the past six years (though may achieve it this year, according to Air Traffic Organization COO Teri Bristol). Ranking Member Rick Larsen (D, WA) stressed that some of the worst shortfalls of fully certified controllers are at high-traffic facilities.

There was considerable agreement among Democratic and Republican Members at the hearing that FAA’s controller hiring and training system needs a lot of work. Matt Hampton, of the DOT Office of the Inspector General, cited the following shortcomings, based on recent OIG audits:

There is poor communication about controller staffing needs between headquarters and ATC facilities around the country.

There was considerable bipartisan criticism of FAA’s introduction into the hiring process of a Biographical Assessment, beginning in 2013. Rep. Peter DeFazio (D, OR) was among many who urged much greater emphasis on recruiting former military and contract tower controllers, as well as graduates of Collegiate Training Initiative colleges, and exempting such candidates from having to pass any form of Biographical Assessment. He asked FAA Deputy Assistant Administrator for Human Resource Management Rickie Cannon what kind of sense it makes to reject an experienced military controller simply because he or she did not receive a passing score on the BA. Cannon gave a non-answer, saying only that (a) FAA does not want to screen anyone out and (b) the BA process is “producing results.”

Rinaldi and former FAA Administrator Randy Babbitt expressed support for pending legislation (HR 5292) that would require FAA to give preference in hiring to former controllers and Collegiate Training Initiative graduates, who would be exempted from any Biographical Assessment; it would also require FAA to invite re-applications from CTI graduates previously excluded by not passing the BA. The bill appeared set for approval by the full Transportation & Infrastructure Committee late in June, but consideration was deferred due to the gun-control sit-in that led to a shut-down of House business.

Several other interesting statements were made at the hearing. Former Administrator Babbitt, now with Southwest Airlines, supported corporatization of the Air Traffic Organization, as proposed in the pending AIRR Act. Babbitt joins all three former ATO chief operating officers in supporting corporatization (Russ Chew, Hank Krakowski, and David Grizzle), as well as former Administrator Langhorne Bond. And in response to a question about whether a corporatized ATC system would do better at recruiting and training controllers, OIG’s Matt Hampton said it would take an ATC corporation time to get up to speed, but that such an entity, focused solely on ATC, would have a better chance of addressing such problems (per the account in Eno Transportation Weekly, June 23, 2016).

Rep. John Mica (R, FL), a former chairman of the subcommittee, proposed that FAA exit the controller training business (except for on-the-job training). Instead, it would shift more training to the CTI schools and then rely on hiring trained CTI graduates and former controllers, who would go straight to on-the-job training. This idea was raised in an OIG report in 2005 (AV-2006-021) and again in a GAO preliminary report in 2012 (GAO-12-996R). But as I reported in the February 2014 issue of this newsletter, GAO never completed the planned cost-effectiveness analysis, due to being told of FAA’s plan to do a pilot-test of the idea—a test that was never carried out, due to the change in policy to introduce the Biographical Assessment.

While the changes proposed in HR 5292 would be a step in the right direction, implementing the OIG/GAO/Mica approach would be a more effective way to bypass FAA’s social-engineering human resources staff. As would, of course, removing the Air Traffic Organization from the FAA.

Six years ago in this newsletter I reported on then-new company AirDat, which had developed a disruptive innovation for aviation weather. Instead of relying on 20th-century weather balloons and ground-based radar for bits and pieces of weather data that would often be many hours old by the time aircraft were in flight, equip existing fleets with weather sensors and crowd-source weather data. AirDat sent the observations, in real-time via the Iridium satellite network, to its data center in Orlando, where it fed a suite of aviation weather models. By 2013 its TAMDAR system had proved itself, following a detailed evaluation using NOAA’s NCEP 3-D weather model, finding that it improved forecast accuracy by 30-50% (and a 4-D model’s accuracy was nearly doubled).

In the three years since then, the idea has spread widely. First Panasonic bought AirDat and created subscription-based Panasonic Weather, enabling subscribing airlines and other aircraft operators to uplink detailed forecasts to their cockpits, via the system which is part of the company’s Flight-Link offering. Since then, at least four other providers have moved into this market, offering (or planning to offer) subscription real-time weather information to airlines and other customers.

One of those is Weather Services International (WSI), whose largest customer is American Airlines. It has installed its Turbulence Auto Pirep System (TAPS) in close to a thousand aircraft, including those of American, Alaska, Dragonair, and several others. TAPS requires no new onboard equipment, but relies on software that is part of an aircraft condition-monitoring system. Data on ride quality are reported to WSI every 20 minutes over the plane’s existing ACARS communication system. It is available on Boeing 737, 757, and 777 and the Airbus A319 and A321. Information on expected turbulence is then provided to all subscribers.

Honeywell is taking a different approach than Panasonic and WSI. It is relying on new software for its RDR-4000 aircraft weather radar that will downlink weather “snapshots” to the ground via broadband. Data from large numbers of equipped planes will be used to create detailed near-real-time pictures of airborne weather to be uplinked to aircraft via broadband. Honeywell plans a subscription weather product called Weather Information Service, starting next year. Rockwell Collins has developed similar software called ThreatTrack for its Multiscan weather radar, and is researching a broader system that would offer more comprehensive weather information to subscribing customers. It already provides non-radar crowd-sourced weather data via its Information Management Services division, the former ARINC. Also in the business is the National Center for Atmospheric Research (NCAR), with a software system called In Situ that also uses turbulence data. It is installed on portions of the fleet at Delta, Southwest, and United.

As I’ve followed these developments over the past six years, I often wonder where this leaves FAA’s plans for things like a centralized NextGen Weather Processor (NWP) to generate better airborne weather data for airspace users. After years with no word about this proposed component of NextGen, last year I received a news release from Raytheon, headlined “Raytheon to Transform U.S. Aviation Weather.” The company had just received a $77 million contract “to build weather processing and display infrastructure for use throughout the National Airspace System”—the NextGen Weather Processor. The news release referred to this as a very big deal, since “weather is the most disruptive factor in the NAS.” Yet it seems to me that while FAA has dithered, the private sector—without need of FAA contracts—has been very busy with disruptive innovations in aviation weather.

Remote Tower in Amsterdam. Aviation Daily reported (June 30th) that LVNL, the ANSP for the Netherlands, has installed remote tower capability at Amsterdam’s Schiphol Airport to monitor its westernmost runway, rather than building an additional 20th century tower as done by FAA at O’Hare and DFW Airports. The tower at Schiphol is also now handling ATC duties at Groningen Airport Eelde, 200 km. away.

FAA Offering ADS-B Rebates for General Aviation Planes. Early last month the FAA announced that owners of small private planes will be able to get $500 rebates on the cost of installing ADS-B/Out equipment on their aircraft. The agency will make these rebates available to 20,000 owners on a first-come/first-served basis. All aircraft operated in controlled airspace must be ADS-B equipped by 2020, but so far only about 18,000 such planes have been equipped.

New CANSO Chairman from Airways New Zealand. At the 20th Annual General Meeting of the Civil Air Navigation Services Organization, the CEO of Airways New Zealand, Ed Sims, was elected to a five-year term as Chairman. The meeting, attended by over 220 delegates from ANSPs worldwide, took place in Vancouver, BC.

Florida Chamber Backs ATC Corporation. On July 1st the Florida Chamber of Commerce sent a letter to Congress, via Rep. Jeff Miller (R, FL), supporting the House FAA reauthorization bill, the AIRR Act, that includes converting the Air Traffic Organization into a self-supporting ATC Corporation. The letter said that “Reforms to our antiquated Air Traffic Control System are both overdue and necessary.”

Aireon Signs MOA with Russia for Space-Based ADS-B. Space-based ADS-B provider Aireon LLC has signed Memoranda of Agreement with two Russian organizations—JSC AZIMUT and JSC INFOCOM-Avia to evaluate the benefits of deploying space-based ADS-B in Russian airspace. AZMUT is a leading equipment supplier to the Russian ANSP, the State ATM Corporation. And INFOCOM is the designated provider of aviation information services in Russia. Russian airspace includes 26 million square kilometers, accounting for over 12.5% of the earth’s surface.

Three More ANSPs Plan to JoiniTEC Alliance. Norway’s Avinor, Lithuania’s Oro Navigacija, and Poland’s PANSA have applied to join the iTEC Alliance. iTEC is a collaboration of aerospace company Indra with the ANSPs of Germany, the Netherlands, Spain, and the UK to create and use a joint flight data processing system to enable advanced operations such as 4-D trajectory-based operations.

Fraport Offering Incentives to Use GLS.Fraport Group, which operates Frankfurt Airport (among others) was one of the world’s first major airports to install a GPS-based landing system (GLS). Its Honeywell SmartPath system augments GPS signals from space to permit precision landings. Because only 8% of landings at Frankfurt currently use GLS, even though the capability is installed or latent on several thousand Airbus and Boeing aircraft, the airport will offer a $110 incentive (reduction of landing noise fees) for each such approach using a glide slope of 3.2% or greater. Steeper approaches reduce noise impacts on airport neighbors.

Saab Researching Augmented Reality for Remote Towers. Remote tower pioneer Saab is considering a virtual reality overlay system by which hazards such as birds or drones could be spotted and highlighted on display screens at remote tower centers. The system Saab is testing can identify potential problems the size of four pixels from 3,000 meters away. Other information overlays are also being considered for remote tower displays.

“The Shuster proposal isn’t perfect, but it’s the best opportunity in years to bring air travel into modern times. Passengers burn $17 billion a year from delays, cancellations, and missed connections, adding up to $30 billion in losses to the economy. Republicans have an opening, if they’ll seize it, to allow private expertise to handle 24-hour airspace the government has proved inept at managing.”
—Editorial, “U.S. Air-Traffic Liberation, The Wall Street Journal, June 10, 2016

“It’s the greatest system money can buy—during World War II—so it is vastly outdated. No one disagrees with that. I think where there is disagreement is how to move forward. . . . Our country has been working for decades to try to modernize the system; it’s not going to happen at the current pace. Our colleagues in the FAA are clearly to be applauded for the efforts they put forth—they’re clearly making some progress—but we have a very, very long way to go, and as they admit, it’s against very significant obstacles and odds toward making progress. . . . It’s a multi-billion-dollar effort confronting us and we need it now—not in 25 years.”
—Gary Kelly, quoted in Rebecca Lee, “Southwest CEO: U.S. Air Traffic Control System Needs Revamping,” CBS News, June 22, 2016

“The point is the [ATC] system is an old concept. The idea of providing a heading, altitude, and speed is old-fashioned. Our industry is going to be disrupted, and we need to break with the old concept. The fact is that the rate of traffic growth is too high for human beings to be the solution. The goal certainly must not be to get rid of air traffic controllers, but rather to help them cope with the growth in traffic and ensure that their workload is manageable.”
—Paul Riemens, CANSO Chair, “A Fresh Perspective,” Airspace, Quarter 2 2016

“Aireon embodies the early promise of Nav Canada—an organization with the flexibility to make strategic decisions in the interests of our customers. In this case, the investment in satellite-based surveillance promises to revolutionize the provision of air navigation services over the world’s oceans and remote areas, with billions in fuel savings and equivalent GHG emission reductions.”
—Neil Wilson, CEO of Nav Canada, “President’s Point of View,” Direct Route, Spring 2016

Despite “traveler impatience with TSA being at the breaking point,” per a recent CNN headline, few of the measures being pushed in Congress will make a significant difference in alleviating the unprecedented lines airports are already experiencing before the start of the summer travel season. As I reported last issue, the two key measures that could be implemented in time to have a major impact are converting some 2,800 TSA Behavior Detection Offices back to their original screening duties and immediately launching the long-delayed third-party PreCheck recruitment for which several contractors have already been vetted by TSA and are basically ready to begin wholesale recruitment efforts.

Instead, we have a whole flurry of too-small or ineffective proposals. They include:

Forcing airlines to cease charging fees for checked baggage (being urged by both DHS itself and several prominent members of the Senate). But evidence from Midway Airport refutes that idea. About 90% of passengers at Midway fly Southwest, which does not charge bag fees. Yet lines at Midway have recently been 90 minutes or longer.

Redirecting several billion dollars from passenger security fees that have been allocated (by Congress) to deficit reduction instead of to screening. That would be fair and reasonable, but getting such legislation enacted seems highly unlikely, and would be too late to hire and train thousands of screeners in time for summer.

More canines—give me a break!

Adding 768 more screeners, as already approved by Congress: still a drop in the bucket, even if they can be hired and trained in time. TSA is short more than 6,000 screeners compared with 2011,when passenger numbers were 11% less than today.

Everybody agrees that TSA really dropped the ball when it projected much faster growth in PreCheck membership than has actually occurred. That’s because it has relied on a sole-source contract with Morpho Detection to operate several hundred locations to which would-be PreCheck members must report and be fingerprinted. Over the past three years TSA has been through three separate rounds of solicitating proposals from big-data companies that have developed and tested, apparently to TSA’s satisfaction, vetting systems that can assess traveler risk, in some cases without using biometrics (e.g. fingerprints). If this really works, it means enrollment applications can be done entirely online, which the companies expect would vastly increase the number of applicants.

I’ve reported on this seemingly never-ending process of changed TSA requirements and new rounds of proposals—and frankly, I’m surprised any of the companies are still willing to participate after such lengthy delays. Apparently, there has been ongoing resistance at fairly high levels within TSA to this third-party concept, and it appears as if Morpho has lobbied to preserve its de-facto monopoly for as long as possible. But there are signs that TSA may actually give the green light for this long-stalled effort, possibly within a month or so.

An industry source who has been reliable in the past told me last week that there is support in Congress for third-party recruitment without biometrics, which may give TSA leadership the courage to finally launch this effort. And the other piece of good news is the May 23rd firing of Kelly Hoggan, TSA’s assistant administrator for security operations, whom my sources identify as having been a key internal road-block to implementing third-party recruitment. If that’s correct, then the prediction that TSA could green-light the program in June is plausible.

I’m still amazed that lobbying by airlines (A4A) and airports (AAAE and ACI-NA) has not aggressively pushed for TSA to return its 2,800 BDOs to their original screening duties. To be sure, that would not completely fill the 6,000+ hole, but since these people would not need the same kind of training as new hires, they could make a big difference right away, not after the summer is over.

Neither airlines nor airports should resign themselves to DHS Secretary Jeh Johnson’s admonition that long wait times are inevitable this summer. Not when several methods are at hand to make major improvements, quickly.

Though I’m not a big fan of antitrust laws, I had to cheer last fall when the Justice Department filed suit to block United’s proposed acquisition of 24 Newark slots from Delta. Why? Because United already controlled 902 (73%) of all the slots at Newark—and was not even using 82 of them. Hogging slots is a deliberate attempt to keep out competitors, especially lower-priced airlines like Southwest, JetBlue, and Frontier. United and Delta asked a federal court to dismiss DOJ’s suit in January, but the whole issue became moot in April when the FAA announced that because delays at Newark had decreased significantly in 2015, it was changing the airport from Level 3 (mandatory slots) to Level 2 (required schedule coordination by FAA).

In the wake of that change, JetBlue has proposed adding six daily flights to Florida cities from Newark, and Southwest has added flights to Las Vegas and Orlando. With Alaska having agreed to acquire Virgin America, it will now gain access to the slots the latter has been using, potentially using them for new transcontinental flights.

No large airline is immune to the temptation to use slots to obtain as much market power as possible. Dallas Love Field is a classic example, though the limitation there is the number of gates, not any imposed slot limits. The political deal that got rid of the Wright Amendment (which had restricted long-distance flights from Love Field) mandated the destruction, solely for political reasons, of 12 of the airport’s former 32 gates, leaving only 20, all but four of which are fully used by Southwest.

So there is some poetic justice in Southwest’s current difficulties in expanding service at another airport, Long Beach, CA. That airport has a locally imposed noise ordinance limiting large-jet operations to 41 per day, with another 25 for small jets and a smaller number for “industrial” flights (dating to the time when McDonnell-Douglas—later Boeing—had an assembly plant at the airport). Currently JetBlue controls 35 of the large-jet slots, and Southwest has begun limited service using the remainder. Southwest is now pointing out that neither the small-jet nor the industrial allocation is being fully used and is asking that some or all of those slots be made available for airline purposes.

The whole approach that has grown up around airport slots is one of political rather than market allocation. The Love Field status quo was a political gift to Southwest, and the status quo at Long Beach is a political gift to JetBlue. United and Delta operate as if they owned the three major New York airports and are entitled to be the dominant players wherever they choose (and competition be damned).

The fact is that at certain airports, demand is greater than their current capacity. No economist would recommend a politically-determined rationing of that capacity, but that is what current practices amount to. A far better approach would be market pricing for runway use, currently best illustrated by privatized London Gatwick Airport, which charges for both landings and take-offs, and varies those prices both by time of day and by travel season (in addition to by noise level). Anyone willing to pay the current price can use Gatwick’s runway, and if prices are low enough to lead to congestion and delays, they can be increased. Noise-based pricing would address Long Beach’s noise concerns far better than politically determined allocations of slots to different types of planes. And demand-based pricing of both landings and take-offs would open up New York’s airports to increased competition, while generating additional revenue to pay for added runway capacity at JFK and Newark.

Anything other than traditional weight-based landing fees used to be illegal in this country, but thanks to the efforts of former DOT Secretary Mary Peters, demand-based pricing is now allowed—though no U.S. airport has dared to try using it. It’s working at Gatwick, and it would work here, too.

The inability of TSA to manage screening so that it does not lead to hour-long lines is prompting some of America’s largest airports to look seriously at replacing TSA screening with TSA-certified screening companies. While these airport boards and managers understand that it would likely take a year or more for such a transition to be implemented, they have little confidence that TSA’s screening problems will be fixed following this summer’s expected nightmares.

Among the airports exploring this option are the following:

Atlanta—where Mayor Kasim Reed fired airport manager Miguel Southwell, who was not pursuing previously announced intentions to apply for the TSA opt-out program called the Screening Partnership Program (SPP).

Chicago O’Hare—where Mayor Rahm Emmanuel and key city council members are talking seriously about applying to join SPP.

Minneapolis/St. Paul—where the Metropolitan Airports Commission is looking into applying to SPP.

Seattle-Tacoma (SEA-TAC)—where Port of Seattle commissioners are also looking into joining SPP.

These aviation professionals look with envy on the absence of long screening lines at SPP members like San Francisco (SFO) and Kansas City (MKC), where TSA-regulated private screeners have been in place since the creation of TSA. They may also be aware that all screening in Canada, and at most large airports in Europe, is carried out by government-certified and regulated screening companies. This follows the basic good government principle of separating regulation from service provision.

There is a growing amount of evidence that private screening is more cost-effective than TSA screening. Greater effectiveness than TSA at stopping prohibited items getting through checkpoints is not a very high hurdle, given the DHS Inspector General’s finding last year that 95% of such items were being missed by TSA screeners. Back in 2007, an outside study commissioned by TSA but never released (though summarized by GAO) found that screening performance at six SPP airports was as good as or better than screening performance at six comparable TSA-screened airports.

TSA continues to claim that its own screening costs slightly less than private screening, but GAO has debunked that claim, which ignores costs such as TSA pensions that are not included in the agency’s budget (and which it therefore ignores in cost comparisons). But the most dramatic cost comparison was done by the staff of the House Transportation & Infrastructure Committee in 2011. Comparing private screening at SFO with TSA screening at LAX, they found that because the private SFO screeners process 65% more passengers per screener than TSA screeners at LAX, switching to private screening at LAX would require 867 fewer screeners there, at annual savings of $33 million. This study also found the screener attrition rate to be 60% greater at LAX (13.8%) than at SFO (8.7%), which also drives up costs (and may slow down lanes as newbies learn the ropes after training).

In 2012, reporters from the New York Times and USA Today interviewed airport directors at SPP and TSA-screened airports, finding that screening companies have a lot more staffing flexibility than TSA. The companies are better at using part-time screeners to staff up for peak periods, rather than having too many full-timers with nothing to do at non-peak times. Similar findings were reported by airport consultant Steve Baldwin Associates in a recent report, finding that SPP airports experienced gains in customer service. That was due to greater workforce flexibility in working with airlines to match screener staffing levels to passenger traffic levels, both seasonally and during each day’s peaks and valleys.

Finally, here’s one red herring that has been raised by an anti-SPP attorney in Phoenix: the possibility of increased liability for airports that switch to private screening. Congress dealt with that in 2005 by amending the 2001 Aviation & Transportation Security Act (which created TSA) to provide clear and unambiguous liability protection for airports, including those that join SPP. It includes language stating that “an airport operator shall not be liable for any claims for damages filed in State or Federal court,” and applies to both an airport’s application to opt out and to the screening activities performed by a TSA-vetted screening company at their airport. This added language is in addition to the liability protection already provided by the SAFETY Act of 2002, which applies to all companies designated by DHS as providing security services and equipment.

The FAA on May 3rd proposed in the Federal Register several possible changes to the current rule that prevents revenues from passenger facility charges (PFCs) being used for airport rail projects that are used by anyone other than airport patrons and workers. The aim would be to encourage better intermodal transportation access to airports. Airlines have historically opposed using revenues for anything other than airside and landside projects, but I think it’s worth looking at the pros and cons of this proposed change.

Globally, there are two types of airport rail projects. One type is an airport station on a regular rail transit line that makes numerous stops (e.g., the Reagan National stop on the Washington Metro Blue and Yellow lines). The other type is a purpose-built line, generally nonstop, between the airport and a central business district station (e.g., the Heathrow Express in London). Over the past decade, I’ve twice used such nonstop lines from the airport to downtown, once in Stockholm and again in Vienna. These trains are fast—and expensive, serving mostly tourists and business travelers, not ordinary transit riders.

I don’t know the economics of the Stockholm and Vienna lines, but I do know the story of the Heathrow Express. It was privately financed, developed, and operated by the airport, after BAA was privatized. Working with British Rail, BAA made a deal to re-purpose an existing rail line from London’s Paddington Station to near the airport boundary, and built several additional miles underground to connect it to two newly created on-airport stations. Instead of nearly an hour each way on the regular transit line, the nonstop Heathrow Express makes the trip in 15 minutes—at the steep one-way fare of £18. BAA has said the capital cost was “over £500 million” and that the operation is in the black.

Toronto recently attempted something similar, spending C$456 million on the Union-Pearson Express, a high-end express train between downtown’s Union Station and Pearson International Airport. With two intermediate stops, the journey time is 25 minutes and the initial one-way cash fare was $27.50. The opening weeks were a disaster, with only about a 10% load factor. A month later, fares were cut nearly in half ($12 cash, $9 for Presto card holders), and ridership increased. What this change does to the project’s economics remains to be seen.

The most costly project now in prospect is a nonstop (20-minute) express line from a downtown Paris rail station to Charles deGaulle Airport. It would be built as a joint project of Aeroports de Paris and state-owned railroad company SNCF, at a cost of $1.9 billion. A separate, 20-year concession is planned for train operations, with the winning bidder having to provide the rolling stock plus operating and maintaining the trains.

A different example is Denver’s recently opened Eagle transit line, between downtown Union Station and Denver International Airport. At a cost of about $1.4 billion, the new line was delivered on time and under budget by a public-private partnership (Fluor and Balfour Beatty). The electrified rail line makes the trip in about 40 minutes, due to there being eight station stops along the way to the airport. However, compared with European airport express trains, the fare is a bargain $9 (compared with taxi fare to DIA often well above $50).

It’s clear there are trade-offs between non-stop airport-only lines and regular transit lines that also serve the airport. Downtown London, Paris, Stockholm, and Vienna are all important tourist as well as business destinations—which is not the case for most U.S. cities. The “downtowns” of Atlanta, Dallas, Denver, Houston, Los Angeles, San Diego, and many others hold only a modest fraction of the metro area’s jobs and are not especially tourist meccas. So where would a purpose-built airport express line go to?

On the other hand, given the serious congestion plaguing large U.S. metro areas, including the airport as a stop on the transit system’s route map seems like simple common sense. With that as a background, let’s look at the three possible changes FAA has proposed to the current PFC usage rules, as summarized in a recent Infra Insight brief from Nossaman LLP:

The first would allow PFC funding of the incremental cost of adding an airport station to a transit system. That seems pretty innocuous, since such a station would almost always be on airport property and the only people using the airport station would be airport patrons and workers.

The second would allow PFC funding of a portion of a new through-track rail line if that was less expensive than building a dedicated people mover connecting to an off-airport rail station (such as the connector from SFO to a nearby BART station). That also seems innocuous, for the same reason as above.

The third possible change goes further and would allow PFC funding for a portion of the rail transit system if the portion to be funded would cost no more than the prorated cost of the trackage on airport property, based on ridership forecasts and the percentage of airport-bound riders.

This is starting to feel like a slippery slope, so let me note for the record that in my surface transportation work, I generally find that rail transit is far less cost-effective than express bus and bus rapid transit in most U.S. metro areas. So my reaction to the FAA’s proposals here is with the caveat that while rail transit is often not a good value for the taxpayer money that it costs, if such a system is going to be built anyway, having it include service to the airport is generally a good idea.

LaGuardia PPP Reaching Financial Close. The $2.8 billion deal under which a private consortium will design, finance, build, operate, and maintain a replacement for the obsolete Central Terminal at LaGuardia Airport was set to reach financial close by press time. The consortium is issuing $2.35 billion in tax-exempt private activity bonds and putting in about $200 million in equity. The Port Authority is providing an additional $1.2 billion to pay for the grandiose entrance hall added to the project by Gov. Andrew Cuomo, and will also pay for a new parking structure. Public Works Financing reports that 85% of the funds pledged for debt service on the bonds will come from airline use payments, with the balance coming from retail concession revenues.

London City Airport Expansion Will Proceed. The election of Sadiq Khan as London’s new mayor, replacing Boris Johnson, has removed an obstacle to the planned expansion of London City Airport. That plan includes adding seven more aircraft parking stands, to be built on a deck over the Thames River. Johnson had refused to sell city-owned land to the airport, which Khan is comfortable with doing. The airport’s private owners expect to spend $435 million on the expansion, which includes a parallel taxiway in addition to the new deck structure.

Propeller Airports Proceeding with Paine Field Terminal. Leading airport design firm Fentress Architects has been hired by Propeller Airports to design the new terminal it plans to build at Paine Field, north of Seattle. The project is a public-private partnership between Propeller and Snohomish County, owner of the airport. The terminal will allow the start of scheduled passenger airline service at the airport, a former military airfield and home of a major Boeing assembly plant. Construction is expected to begin in fourth quarter 2016, with the first commercial flights possible by fourth quarter 2017.

Vancouver Airport Sells Vantage Airport Group. Late in April the Vancouver Airport Authority (YVR) sold its 50% stake in Vantage Airport Group, which owns and operates airports worldwide. YVR launched Vantage in 1994 to provide management services at other airports. In 2008, YVR sold 50% of Vantage to Gateway Airports, and Gateway has now purchased the remaining 50%. The company manages eight airports, in Canada, Cyprus, and Nassau (Bahamas). It is also part of the PPP consortium that will develop and operate the new Central Terminal at LaGuardia Airport in New York.

CEI and Rutherford Institute Suing TSA Over Body Scanner Rule. Two nonprofit organizations—Competitive Enterprise Institute and Rutherford Institute—filed suit May 2nd in the U.S. Court of Appeals for the DC Circuit challenging the TSA’s final rule on body scanners. The organizations argue that TSA’s benefit/cost analysis failed to take into account academic research (from Cornell University and elsewhere) that invasive screening procedures have diverted significant numbers of travelers from flying to driving, resulting in about 500 additional highway deaths per year.

Amazon Doubling Air Cargo Fleet. In May Amazon announced a second air cargo lease deal, this time with Atlas Air Worldwide, for 20 more Boeing 767 freighters. Atlas Air will operate the leased aircraft for Amazon over the next 10 years. Like Amazon’s previous deal with Air Transport Services Group (reported here last issue), the Atlas lease agreement gives Amazon the option to acquire up to 20% of Atlas Air’s common shares over the next five years at a stated price.

Bulgaria and Serbia Planning Airport Privatizations. The government of Bulgaria in May announced a forthcoming competition to upgrade and operate the Sofia Airport under a 35-year concession. The successful bidder must make an up-front payment of at least $314 million and make an annual payment of at least 5% of net airport revenue. And the Serbian government has hired advisors for the privatization of Belgrade Airport: KPMG, Lazard, Linklaters, and Mott MacDonald. Part of the advisors’ task is to aasses the relative merits of an outright sale versus a long-term concession. Currently, 16% of the airport is held by investors, with the government owning the rest.

Bipartisan House Bill on Perimeter Security. On April 28th, the House Homeland Security Committee voted unanimously for a bill by Rep. Bill Keating (D, MA) requiring TSA to assess the perimeter vulnerabilities of U.S. airports. Keating cited a 2015 AP study that found at least 268 penetrations since 2004 at 31 major airports. Recent news reports on continued intrusions make the issue more politically timely.

Lithuania Appoints Airport Privatization Advisors. The Lithuanian Ministry of Transport and Lithuanian Airports have hired a consortium led by InverVistas to advise on the country’s planned airport privatization. The process will involve all three commercial airports: Kaunas, Palanga, and Vilnius. The consultants will structure the procurement, prepare the documentation, and develop the procedures for bidders to compete. The contract is for 22 months.

“The TSA is not just about staffing; it’s about management. It’s about allocation of its resources, and it’s about understanding that airline schedules are published. There are no big news bulletins here; everybody knows what time the big crunch times are at the airport on domestic and international flights. And there’s no excuse for not keeping every line open and properly staffed during the crunch times,”
—Peter Greenberg, CBS News Travel Editor, in John Phillips, “The TSA Is Not Giving Travelers Much TLC,” Orange County Register, May 23, 2016

“Research from the House Committee on Transportation and Infrastructure found potential savings of $1 billion over five years if just our top 35 busiest airports operated as efficiently as the private screeners at San Francisco’s airports do. The report also showed that private screeners processed an average of 65% more passengers per employee, thanks in large part to higher employee retention rates and better morale—in stark contrast with the TSA, which has for years been dogged by complaints of low morale and a culture of complacency. Expanding the private screening program, if not privatizing the airport security business entirely, would go a long way to helping improve the experience fliers face at our nation’s airports. The TSA, of course, would still exist to set standards and oversee quality control for the companies administering security.”
—Rep. Darrell Issa (R, CA), “A Simple Solution to the TSA Breakdown,” CNN.com, May 24, 2016

“This problem has been years in the making. To solve it, the government may have to get the TSA out of the screening business altogether. The idea is neither new nor outlandish. Canada and most Western European companies employ private contractors to screen passengers. . . . There’s a strong efficiency argument as well. Under the current system, the TSA both sets the rules for airport security and enforces them. In effect, the agency regulates itself. Local authorities have few if any means to seek redress if TSA proves inefficient, ineffective, or weak on customer service. Firing a contractor is easy; firing a unionized government employee much less so.”
—Adam Minter, “Time to Get Rid of the TSA,” Bloomberg.com, May 10, 2016

“The Government Accountability Office is also skeptical that the TSA is stopping terrorists. It concluded in 2013 that there’s no evidence the agency’s SPOT program, which employed 2,800 as of the study and attempts to scan passengers for suspicious behavior, is at all effective. Only 14 percent of passenger flaggings by TSA officers led to a referral to law enforcement. Only 0.6 percent of TSA flaggings led to an arrest. None of those were designated as terrorism-related.”
—Dylan Matthews, “The TSA Is a Waste of Money that Doesn’t Save Lives and Might Actually Cost Them,” Vox.com, May 17, 2016

“Consumers who apply for PreCheck membership can wait 2 to 3 weeks for an enrollment appointment. Then they must arrive for an interview with proof of U.S. citizenship and provide fingerprints for FBI background-check purposes, often at enrollment centers on the secure sides of airports, which requires an airline ticket. Additionally, many airports do not have enrollment centers, and other enrollment centers are in hard-to-find locations such as seaports. Finally, enrollees can wait weeks more for approval. The solution is to scrap the off-putting and grossly inefficient in-person enrollment process and replace it with a process which is exclusively online and that could enroll millions of members in weeks, once green-lighted. TSA requires an FBI background check. However, 3rd party security firms that offer online enrollment use felony records and all manner of terrorist watch lists, which are just as predictive as FBI checks. There is broad industry and government support for this approach. Indeed, many at TSA, where this process has been successfully vetted over the past two years, are supportive. The just-replaced head of security at TSA blocked this online enrollment model.”
—Kevin Mitchell, “The U.S. Has a ‘Brussels’ Problem,” Business Travel Coalition news release, May 26, 2016

March was a debacle for TSA, due to excessively long checkpoint screening lines at major airports, and both airlines and airport directors see those lines as a preview of what’s in store for the summer travel season. American reported that over 1,000 passengers missed their flights at ORD in March, due mostly to screening delays, and 650 AA passengers missed their flights at CLT on a single day, Good Friday (March 25). And during spring break week (March 14-20, American tallied 6,800 passengers having missed their flights.

As I reported last issue, the primary cause seems to be that TSA’s screener workforce declined from 47,630 in 2011 to just 41,928 in 2016 at the same time as passenger numbers increased over 11%. The agency had been counting on a much faster growth rate of PreCheck use, but it repeatedly delayed implementing long-planned contracts with third-party companies for large-scale PreCheck recruiting, and was forced to eliminate its “Managed Inclusion” process that had been funneling large numbers of non-members into PreCheck lanes to speed up overall screening.

Major problems have been widely reported at Atlanta, Charlotte, Minneapolis/St. Paul, San Jose, and Seattle in March and April. ATL general manager Miguel Southwell in February gave TSA 60 days to make major improvements in screening times, or he would apply to replace TSA with contract screeners under the agency’s Screening Partnership Program (SPP). By early April, TSA had appeared to head off that threat, by somehow allocating more staff and agreeing to more than double the number of canine units at ATL. Southwell told the Atlanta Journal-Constitution on April 6th that “As long as we continue to see progress,” there would be no need to privatize screening.

Charlotte’s acting director Brent Cagle has been engaged in a war of words with TSA over the extent of delays and missed flights at CLT. Defending itself, TSA held a news event at the airport to tout its new automated, in-line checked-baggage screening system. That system will free up about 60 bag screeners, whom TSA plans to reallocate to other airports. Cagle wants them shifted to passenger screening at CLT. So far, Cagle has made no mention of shifting from TSA to a private contractor via SPP.

It’s a different story at Minneapolis/St. Paul. In late March MSP’s Metropolitan Airports Commission announced that it is looking into joining SPP, so as to get a better match of screening numbers to changing passenger demand. MAC’s Pat Hogen reminded those unfamiliar with SPP that the TSA-certified contractors are subject to all TSA regulations and risk having their contracts cancelled if they do not perform acceptably. In a March 1st letter to TSA Administrator Peter Neffenger, Minnesota Gov. Mark Dayton wrote that TSA has ruined the efficiency of MSP’s checkpoints by changing their configuration.

San Jose in booming Silicon Valley has been especially plagued by long lines and missed flights, according to the San Jose Mercury-News. While chronicling many tales of woe from passengers who missed their flights at SJC, the reporter matter-of-factly noted that nearly SFO “didn’t experience any significant issues during spring break, despite strong volumes.” I looked in vain for any sign that SJC leadership might be looking into applying to participate in SPP, as SFO has done since the beginning of TSA.

Seattle has asked TSA to temporarily suspend its requirement that all screeners be trained at its training center in Georgia, so that the faster process of training new screeners locally could be reinstated for SEA, and at an April 7th hearing, TSA Administrator Neffenger promised Sen. Maria Cantwell (D, WA) that this will be done. The airport has also announced it will be contracting with a private firm to staff non-security positions prior to the checkpoint, in hopes of freeing up more screeners for the screening lanes. But thus far there has been no public mention from SEA officials about considering SPP.

In mid-April the heads of airport organizations AAAE and ACI-NA sent a joint letter to Neffenger with seven suggestions on alleviating long lines, including a “marketing blitz” about passengers joining PreCheck. But if there was ever a time for these organizations to explain the merits of privatized screening to their members, now is the time. They could also explain that at nearly all the major airports in Europe, providing screening is an airport responsibility, not that of the national government. The latter oversees the process, by setting criteria for screening, and the airports are free to do this either with their own security staff or by contracting with government-approved security companies. And airports typically have service agreements with the airlines they serve, including screening wait-time standards. Both airports and airlines take a far more active role in measuring performance, including screening performance, than we see in this country. What a refreshing change that would be, especially for beleaguered airline passengers.

Between 2010 and 2016 airport privatization has continued to expand in Europe. According to a new report from Airports Council International-Europe, as of 2016 over 40% of European airports have at least some private shareholders. Even more dramatic, nearly three of every four passenger trips this year will be through one of these airports. And 78% of the remaining fully public-sector airports are corporatized, meaning they are set up as commercial entities under ordinary corporate law, with governments as their sole shareholders. The report is “The Ownership of Europe’s Airports, 2016”; it is available online from www.aci-europe.org. The report includes detailed data for the airports of 45 countries, both EU and non-EU.

The largest impending European privatizations this year are in France, with the French national government selling its 60% stakes in the Nice and Lyon airports. The former is estimated to be worth $1.6 billion, with the latter at about $990 million. Local chambers of commerce own 25% of each airport, with the municipal governments owning the remaining 15%. The national government plans to use the proceeds from the sales to recapitalize state-owned power company Areva. Teams expected to bid for one or both of the airports include Ardian teamed with Changi Airport, Ferrovial teamed with Meridiam, Macquarie, and possibly Allianz, Global Infrastructure Partners, and Industry Funds Management.

Inspiratia Infrastructure reports that several other European countries will be putting airports on the market in 2016. Lithuania aims to start the bidding process in the fourth quarter for the airports of Vilnius, Kaunas, and Palanga. And Bulgaria’s government announced on March 30th that it will award a concession to redevelop and improve the airport of its second largest city, Plovdiv.

There has clearly been a paradigm shift in the conception of airports in Europe during the last 30 years. Airports are now understood to be businesses, even when they are 100% owned by government. Large and medium hubs, in particular, are expected to be self-supporting and even profitable for their shareholders, based on their various aeronautical and non-aeronautical revenue streams. In a number of countries, corporatized and privatized airports are expected to pay ordinary business taxes. And in most of the countries that have embraced airport privatization, foreign ownership is becoming non-controversial, even in countries like France with a historically strong sense of nationhood. This is a far cry from what still appears to be almost an “infant industry” status for airports in the land of free enterprise.

Sen. James Lankford (R, OK) and Rep. Steve Russel (R, OK) have introduced the Free Market Flights Act, which would end the $263 million federal program called Essential Air Service (EAS). The pair cited a recent report from the Congressional Research Service that provides basic information about the program and how it has grown, despite a series of congressional measures to cut it back. “Essential Air Service (EAS)” is CRS Report 44176, dated Sept. 3, 2015.

Ronald Reagan once quipped that there is nothing so permanent as a temporary government program, and EAS can serve as a case study. It was enacted in 1978 as part of the bill that deregulated U.S. airline service. EAS was intended as a temporary transition measure to help small communities adjust to the competitive airline service market brought about by deregulation. But when the 10 years were nearly up in 1988, Congress extended EAS for another 10 years. With a growing constituency lobbying for the program, our lawmakers made EAS permanent in 1996. To somewhat disguise its growing cost to taxpayers, they mandated that the relatively new FAA overflight fees, paid by airlines that use U.S. airspace but do not land or take off here, be dedicated to EAS, and today those revenues cover 38-40% of its $283 million budget.

Taxpayer-friendly members of Congress have managed over the years to tighten eligibility for EAS subsidies, as tabulated by the CRS report:

2000: prohibiting EAS subsidies for services to airports located fewer than 70 highway miles from the nearest large or medium hub airport or that required a subsidy greater than $200/passenger (unless the airport is more than 210 miles from such a hub).

2011: prohibited EAS subsidies that exceed $1,000 per passenger, regardless of the distance to a hub airport.

2012: added a requirement for at least 10 enplanements per day, and prohibited new communities from being added.

Despite these reforms, 159 communities today receive subsidized airline service via EAS. CRS finds that, in constant 2014 dollars, spending on EAS has increased 600% since 1996 and 123% since 2008. Its report also notes that in many cases there is no competing bid for EAS airline service, suggesting the possibility of monopoly pricing. Moreover, subsidy cost is not one of the four major factors DOT is required to consider when evaluating bids to provide such services.

What CRS did not do is to analyze the availability of alternatives to EAS to provide access from small cities like Hagerstown, MD (per-passenger subsidy $580), Greenville, MS ($486), Merced, CA ($646), and Clovis, NM ($830). Unsubsidized scheduled intercity bus service is available in more than 2,800 cities and towns across the country, and for most of the past decade has been the fastest-growing mode of inter-city passenger travel. It seems highly likely that if any of the 159 EAS cities does not have such service, a per-passenger subsidy far more modest than the typical $200-$500 per passenger EAS subsidy could attract such bus service.

Kudos to Sen. Lankford and Rep. Russell for putting this issue on the agenda. However, on April 22nd, the Senate voted to include $150 million in general-fund support for EAS in the THUD (transportation and housing) appropriations bill. That is $5 million less than last year. The House has not yet addressed EAS funding.

The suicide bombing attack on the airport and subway in Brussels has led to some serious reflection on what does and doesn’t make sense when it comes to transportation security. Some of the initial reactions reflect panic and public relations, more than sober reflection. There were many calls in Europe for expanding the security perimeter of airport terminals to include the entire check-in area, which officials of ACI-Europe quickly pointed out were akin to simply moving the target area to outside that new perimeter (where huge numbers of people would be queued up awaiting screening). As security consultant Douglas Laird told the Wall Street Journal, wherever screening is done, “you still have the queues. If you cause congestion, a whole lot of people crammed together, it’s a target-rich environment, no matter where it is.”

Before looking further into what measures might make sense, let’s first step back and get some perspective on the size of the threat. The National Consortium for the Study of Terrorism and Responses to Terrorism maintains a Global Terrorism Database, covering 1970 to 2014. It reveals that just 5.3% of all terrorism attacks over those 44 years targeted some form of transportation, including airports and aircraft as well as subways and railroads. Of the transportation targets, 6.4% were airports, and another 1.9% were subways. Furthermore, attacks on transportation targets have declined recently, comprising only 3% of all attacks between 2010 and 2014 (down from 5.3% over the entire 44 years). The point of these statistics is that entire developed countries are target-rich environments, so we should be wary of allocating the lion’s share of defensive measures to transportation.

One of the reporters who interviewed me shortly after the Brussels bombings reminded me of a 2004 RAND Corporation study, “Near-Term Options for Improving Security at Los Angeles International Airport,” which is still available on the RAND website, www.rand.org. After identifying 11 major categories of attack, the analysts reviewed potential measures to reduce the vulnerability to each. After estimating the costs and possible effectiveness of each, they separated them into four groups:

Low-cost options that would greatly reduce vulnerability, which should be acted on immediately;

High-cost options that would greatly reduce vulnerability, which should be studied for affordable implementation and time-frames;

Low-cost options that modestly reduce vulnerability, and could be acted upon as part of planned modernization efforts; and,

Expensive solutions to modest problems, which are not recommended.

For space reasons, I will discuss only the first of these here, but I recommend this report as a model of how such problems should be analyzed and dealt with.

The first low-cost option was “limit the density of people in unsecured areas.” This means eliminating lines at baggage check-in and for curbside check-in. What surprised me is RAND’s conclusion that “the costs of eliminating check-in lines are quite modest.” They note that “the amount of actual work required to check bags, etc. remains the same whether people have waited or not. Substantial reduction of lines can be implemented immediately with small changes to airline and TSA staffing policies.” Specifically, they recommend additional ticket agents and skycaps during peak periods and one additional staffed screening lane in each terminal, staffed during peak periods.

Their second low-cost option was to add permanent vehicle security checkpoints with bomb detection capability. This recommendation is not aimed at car bombs at the terminal curb, on the assumption that large concentrations of people at curbside were already dealt with by the first recommendation. Instead, it is aimed at singling out large trucks that would be diverted before entering the airport itself.

In contrast to this quantitative approach, the Senate on April 7th added five security amendments to its FAA reauthorization bill.

The first includes an array of measures (and requirements for TSA to produce reports) to beef up access control to secure areas of the airport. This did not include any mandate for 100% employee and contractor screening, which is on RAND’s list of very costly measures. These relatively low-cost measures would probably do some good.

The second requires TSA to expand PreCheck, including to move forward with its much-delayed program to contract with third-party companies for large scale recruiting and pre-vetting of new members of PreCheck—a much-needed change.

The third and fourth impose an array of requirements for TSA to work with overseas airport security counterparts at airports from which flights to the United States originate. It’s not clear how much any of this will help.

And the fifth would double the number of TSA VIPR teams to 60; these roving teams would be authorized to patrol airports in addition to subway and railroad facilities. This one is mostly security theater.

The Senate’s grab-bag of measures was arrived at without any quantitative analysis or weighing of benefits versus costs. That some of its measures would probably be cost-effective is a fortuitous outcome, rather than being the result of serious study. The current House FAA reauthorization bill does not address aviation security, which is not part of FAA’s responsibility. So it is not clear whether any of the Senate’s new measures will survive the eventual conference committee deliberations on FAA reauthorization.

Last year FAA reported 764 UAS (drone) sightings near aircraft, and that rate increased to 582 sightings in the five and a half months between Aug. 21, 2015 and Jan. 31, 2016. Those data were analyzed by the Center for the Study of the Drone at Bard College. Of the 582 incidents, 36.2% were classified as “close” encounters, with the UAS coming within 500 feet of a manned aircraft. In a previous analysis, Bard researchers found that a majority of UAS sightings occurred within five miles of an airport.

Based on recent sales trends, in its latest annual Aerospace Forecast the FAA dramatically increased its projection of UAS sales. Whereas last year’s forecast projected there would be 25,000 such craft in operation in U.S. airspace by 2020, the new forecast expects annual sales to be 7 million in 2020, of which 4.3 million would be to hobbyists and 2.7 million to commercial operators.

These kinds of numbers were being anticipated in the UAS industry well before the revised FAA forecast. Back in February, I talked with Pepperdine University professor Greg McNeal, co-founder and executive vice president of a start-up company called AirMap. The company was founded to provide a solution that would enable airports to keep track of nearby drone operations—and to enable their operators to comply with the 2012 federal requirement to notify the airport prior to operating a drone within five miles of any airport.

AirMap’s solution is a system called D-NAS (Digital Notice and Awareness System). Their business model is (1) to make the notification capability available at no charge to drone manufacturers so it can be built into their products as original equipment, and (2) to provide airports (for a fee) an online dashboard that keeps track of notifications from drone operators. The digital notice from each drone includes the GPS location of the flight, its planned duration, the operator’s identity, and the operator’s contact information. On the airport’s dashboard, the flight information is plotted onto a map, as well as provided in a list format, including the contact information.

Your initial reaction might be skepticism, to the effect that this sounds fine in theory, but how could it be put into practice in a way that would be effective? The first part of the answer is that AirMap has won the cooperation of the big three drone producers: DJI, 3D-Robotics, and Yuneec are all including the AirMap notification capability in their products. AirMap has also developed an app to enable operators of other drones to make use of the service. On the airport side, AirMap has been working closely with the American Association of Airport Executives, which represents aviation professionals at 850 U.S. airports. AAAE got the airport equipage effort under way in January with the first 10 airports to apply getting the system for free. Since then, as of the last week of April, it has signed up over 75 airports, including Charlotte, Denver, Houston Intercontinental and Houston Hobby, Los Angeles International, Portland International, and Van Nuys Airport.

AirMap is not presenting D-NAS as the solution to managing all low-altitude drone traffic; rather, it is a solution specific to the need to protect airports from drone intrusions. McNeal told me the company is working with NASA and the other companies that are pursuing the concept of UAS Traffic Management (UTM), on the widely accepted premise that low-altitude UAS is so different from traditional air traffic management that it will not likely become part of the FAA’s air traffic control system. Rather, as Amazon, Google, and other leading companies anticipate, a separate low-altitude system (UTM) will be developed collaboratively and eventually blessed by FAA.

The Administration’s FY 2017 budget proposal for the TSA includes a series of annual increases in the per-person aviation security fee. Currently $5.60 per one-way trip, it would rise to $6.60 in FY 2017, to $7.00 in FY 2018, and $7.25 in FY 2020. But due to planned shifts in where the revenue would go, over the 10-year period through FY 2026, the proposal would generate $6.9 billion for TSA’s budget and $5.4 billion for general fund deficit reduction. The former number, by covering a significant fraction of TSA’s budget, would represent proceeds from a user fee. The latter number, pure and simple, would be a tax increase. (This analysis is from Eno Transportation Weekly, Feb. 11, 2016.)

Unfortunately, that is not how DHS Secretary Jeh Johnson is portraying it in public. In testimony before the Senate Homeland Security Committee on March 8th, Johnson told lawmakers the following:

“Right now I believe aviation security is critical, given the world situation. We need help to pay for that. Those who use the system, as opposed to taxpayers generally, should help a little more in paying for those things. If these are not increased, we’re going to have a real problem finding where to pay for aviation security.”

Users-pay/users-benefit is a sound principle for public functions that benefit specific people, as opposed to all taxpayers, and having airport users pay for TSA services there is appropriate. But trying to sneak in a tax increase disguised as a user fee is indefensible. Congress should reject this request, just as it has in several previous years.

Port Authority Board OK’s LaGuardia Airport P3 Deal. On March 24th the board of the Port Authority of New York & New Jersey approved the $4 billion public-private partnership to replace the Central Terminal at LaGuardia Airport. Winning bidder LGA Gateway Partners (including Meridiam, Skanska, and Vantage Airport Group) will design, finance, build, operate, and maintain the new terminal. Commercial close was expected by the end of April.

Thompson Suggests TSA Re-assign BDOs. As a way to beef up screener numbers at airport checkpoints, Rep. Bennie Thompson (D, MS) has proposed to Administrator Peter Neffenger that TSA re-assign its Behavior Detection Officers to regular checkpoint screening duties. Since there is still no evidence that BDOs add any meaningful value to airport security, this re-assignment would add several thousand screeners to help alleviate this summer’s dire shortage. Thompson is the ranking Democrat on the House Homeland Security Committee.

Amazon Leases Cargo Plane Fleet. After a trial period in which Air Transport Services Group operated cargo flights for it, Amazon in March agreed to lease 20 Boeing 767 aircraft from the company, which ATSG will operate for Amazon. The deal also gave Amazon the right to acquire just under 10% of the company, which the company proceeded to do. A long article in the April 4 issue of the Journal of Commerce provided a lot more detail on Amazon’s expanding distribution network.

Ontario Airport Getting Expanded UPS Operation. Troubled Ontario (CA) Airport may not be adding much in the way of airline service, but its cargo business is definitely expanding. Last year UPS completed a 416,000 sq. ft. facility for urgent, next-day packages. This year, it is expanding its existing ground sorting building by 15% to 900,000 sq. ft. and will add 500 more people over the next five years to the 4,500 it already has at the airport. The Inland Valley Daily Bulletin reports that new distribution centers are being built near the airport, to take advantage of its air cargo services.

European Parliament Approves PNR Legislation. Spurred on by the Brussels Airport bombing, the European Parliament in April gave final approval to a long-discussed law that requires airlines to provide passenger name record (PNR) data on all those entering or leaving the European Union by air to police and security agencies. It also allows EU member countries to require similar reporting of PNR data on flights within Europe. The measure was proposed five years ago, but was delayed by debates over privacy concerns.

Governing Reports on U.S. Airport Public-Private Partnerships. In addition to the P3 deal to replace the aging Central Terminal at New York’s LaGuardia Airport, Governing‘s Andrew Deye reported (Feb. 17th) that the Austin City Council authorized negotiations with Highstar Capital to lease 30 acres including the South Terminal at Austin-Bergstrom International Airport. Highstar is part of the P3 company that has leased San Juan International Airport for 40 years, and recently completed a $148 million renovation of terminals, baggage handling, and parking facilities.

Paraguay Concession for a New Airport. Asuncion, the capital of Paraguay, is in line for a new airport, under that country’s new P3 program. It will be developed under a 30-year design-build-finance-operate-maintain concession agreement, arrived at competitively, and is expected to cost $200 million to construct. Six groups, including OHL and Vinci Airports, have purchased the tender documents and are expected to submit bids.

Orlando International Launching $1.8 Billion Expansion. The Greater Orlando Airport Authority voted unanimously in mid-March to proceed with a major expansion of the airport. It will add a south terminal, including airside, landside, parking, and a multimodal transportation center. The vote was triggered by the airport having reached a previously agreed threshold of 38.5 million passengers in 2015, for a set of facilities designed for 24 million. The primary financing will be via bonds backed by passenger facility charges (PFCs). The first phase could open as soon as 2019, according to the Orlando Sentinel.

Infrastructure Investor Awards for 2015. In its March 2016 issue, Infrastructure Investor named as its Latin American PPP Deal of the Year the $13 billion project to develop and operate the new Mexico City International Airport. Winning as Global Developer of the Year was Vinci, whose Vinci Airports won the bidding for Osaka and Kansai Airports and went on to acquire six of the nine airports in the Dominican Republic.

Rand Paul Seeks Expanded FFDO Program. Arguing that the Federal Flight Deck Officer program, which trains airline pilots in armed response to attempted hijacking, does not reach enough pilots, Sen. Rand Paul (R, KY) is seeking legislation to add five training facilities, allow the classroom work to be done online, and allow FFDOs to use the Known Crewmenber check-in system at airports. His attempt to add the measure to the Senate FAA reauthorization bill failed, but he is likely to continue pursuing the matter.

Honduras Replacing Tegucigalpa Airport. Considered by many pilots as the world’s most dangerous commercial airport (due to nearby mountains, a steep approach, and a short runway), Tegucigalpa Airport, serving Honduras’s capital city of the same name, will be replaced via a P3 concession. The new Palmerola International Airport will be built on the territory of a military base and will have an 8,000 ft. runway (vs. 7,000 ft. for the existing airport). A consortium of Inversiones EMCO and Munich Airport will design, build, finance, operate, and maintain the new airport under a 30-year concession.

Dubai Airports Implementing a PFC to Pay for Expansion. The government has announced that as of July 1st all passengers using airports in Dubai will pay a passenger facility fee of $9.45, the proceeds of which will be used to improve and expand the country’s airports. Excluded from the PFC will be children under 2 years, airline crewmembers, and transit passengers whose departing flight number is the same as their arriving flight number.

Brussels Airport Investor Not Deterred by Bombing. Infrastructure Investor reported in April that Canadian pension fund Ontario Teachers’ Pension Plan, a major shareholder in Brussels International Airport, will continue to invest in airports as part of its infrastructure portfolio. OTPP also owns stakes in Copenhagen Airport, the UK’s Birmingham and Bristol Airports, and most recently London City Airport.

Towering Achievement or Towering Anachronism? The cover story of the January 2016 issue of Airport Business was about the $70 million new control tower that opened last year at San Francisco International Airport (SFO). The tag-line on the story predicted that it would “change the way air traffic control towers look and are built forever.” Let me suggest a contrary view: now that remote tower technology is proving itself in Europe, the SFO tower could be one of the last times that $70 million is spent to house people and equipment that would be more secure underground, aided by real-time sensing equipment that can see through the fog that plagues SFO and many other airports.

“One of the things that concerns me, I hope unnecessarily, is that the newfound financial well-being of the airlines invites government intrusion. I already see bills being offered telling us how to provide customer service. I see bills being offered to increase our taxes and fees enormously. I hope we don’t succumb to that. The people—not just of the United States but of the world—should be alive to the fact that the new regime has permitted them to fly in enormous quantities for the first time.”
—Herb Kelleher, in Seth Miller, “Herb Kelleher’s Take on U.S. Aviation: Hands Off!” Airwaysnews.com, March 15, 2016

“Proposals like [seat size regulation] clearly show either lack of understanding of, or disregard for, fundamental commercial reality. The hourly operating cost of a Boeing 737 would be about the same if it had 140 seats vs. 150. So under the proposed legislation [for increased seat pitch], in time tickets would cost more. . . . And if we’ve learned anything about how most consumers buy air fares in competitive markets, we know that price drives choice. A little history lesson: in the late 1990s, . . . my former employer, American Airlines, voluntarily removed seats throughout the entire economy-class cabin on every one of their roughly 700 aircraft. In order to make the reconfiguration revenue-neutral, we began charging just a bit more per ticket. The marketplace responded clearly: they loved the legroom, but were not willing to pay the roughly 3% more per ticket (9 bucks on a $300 fare). So after spending a lot of money on the planes and on promotion, American put the seats back on. Like United before them, they subsequently created cabins with two legroom versions, and giving consumers the option of paying more for more room has worked well.”
—Rob Britton, “Guest Op-Ed: Airline Seat Size Issue Overblown,” Eno Transportation Weekly, March 11, 2016

“There exists a bipartisan recognition that adjusting the PFC cap is long overdue. After all, addressing the issue of airport infrastructure and airline competition are about as meaningful measures as lawmakers could hope to address in FAA renewal. The Senate was intent on advancing a balanced, bipartisan bill. As is the case in Washington, however, it’s harder to do something good than to keep something good from happening. Travelers will now have to wait until at least the 20th anniversary of the last PFC adjustment in order to reap the benefits of updated airports and restored airline competition.”
—Jonathan Grella, U.S Travel Association, Politico Pro, March 8, 2016

“Where there is evidence that an airport has market power, this does not necessarily mean that its charges are too high or that there is a need for heavy-handed regulation. This applies even with a profit-motivated privatized airport. It is not market power that is the issue; it is the abuse of the market power. . . . It may be in an airport’s commercial interests to set aeronautical charges at a level that makes it more attractive to airlines to increase the number of passengers using its facilities. Setting prescriptive pricing guidelines could stifle innovative pricing to the detriment of airlines, airports, and ultimately passengers. Privatized airports, with their commercial focus, should be encouraged to challenge the traditional airport business model, not buckle under it.”
—”The Privatization of Airports Is Not a Reason for Airlines to Panic . . . Yet,” Aviation Advocacy Blog, March 17, 2016